No one wants to be surprised by an unexpected expense. And no one wants to look at the bill for that expense and panic when they realize that they don’t have enough in their wallet to cover it. This is why it’s important to set up a rainy day fund.
What Is a Rainy Day Fund?
A rainy day fund is a lot like an emergency fund — it’s a savings account that’s meant to sit untouched until an emergency expense crops up. Then, you can dip into that account and deal with the problem right away. You don’t have to worry about squeezing the cost on your credit card or ruining your budget. You don’t have to call up your friend for an IOU or ask a relative for help. You can pull out those savings and get back to normal.
The main difference between a rainy day fund and an emergency fund is that the latter is much bigger. An emergency fund is designed to cover large lifestyle shifts, like losing a job. So, you’ll have a significant amount of savings in there. A rainy day fund is supposed to cover smaller, one-time expenses:
- Flat tires
- Overflowing toilets
- Broken A/C units
- Emergency veterinary visits
- And more…
What Can You Do without One?
You have several options. If you have enough room on your credit card, you can add it to your balance. If you can’t use your credit card, you can ask a trusted friend or relative for an IOU. And if that’s not a good solution, you can take out an installment loan.
An installment loan could be a great option for you because it lets you have access to enough funds to cover your emergency expense in a short amount of time. Go to Moneykey.com/installment-loans-online/ to see how you can apply for a loan. That way, you can take care of your problem and move on. There’s no need to put your life on pause.
How Can You Build a Rainy Day Fund?
Unless you have a significant amount of savings stashed away already, your rainy-day fund is going to take time and commitment to build. Slowly but surely, you’ll put together your financial safety net.
Start by following household savings tips to cut down on spending and give your budget a boost. Then, set aside a small amount to put into your account every single month. It could be $50 a month. After a year, you’ll have $600 saved for small emergencies. In two years, you’ll have $1200. And so on and so forth.
All you have to do is stick to this pattern. Add something every month, and don’t take anything out unless it’s an emergency. This is how your fund will grow.
It’s always wise to pack an umbrella in case of an unexpected shower. That little bit of planning will keep a small problem from ruining your whole day. A rainy day fund works exactly the same. A small expense doesn’t have to become a big problem. You’ll pay the cost and go about your day like nothing went wrong.