Savings: Tips for Setting Aside Money for a Rainy Day

by Miranda Marquit

One of the most important things you can do for your finances is to set aside money for a rainy day. You never know when your car will break down or when you will need to come up with a significant co-pay for a medical procedure. When you don’t have a rainy day fund, these unexpected expenses can be financially debilitating and emotionally stressful. Here are some tips to help you get moving on your rainy day fund and prepare for emergencies:

Your Rainy Day Fund – Start Now

rainy day fund

Momma always said there would be days like this...

The best time to start is now. “Tomorrow” can stretch into “next week”, “next month”, “next year”, “when I have the money” and “when we can afford it” until it never really gets done. The key is to do it now. Most banks and credit unions will allow you to open a savings account with very little — usually no more than $25. Open your account now, and start saving now.

It’s OK to Start Small

As already mentioned, you can open most accounts with $25. It’s alright if you have to start small, only putting in a few dollars a month. If you use cash a lot, put your change (or even dollar bills) in a jar at the end of each day. Then, once a month, add it all up and take it to the bank.

The most important thing is that you are starting a habit of saving money. As you cut other expenses from your budget, and as you look for more sources of income, you can begin increasing the amount of money you put into your rainy day fund. But first you have to be in the habit of “paying yourself first.”

Automate Your Savings

A lot has been written about the advantages of automating your money — and for good reason. You can automate your savings so that your money goes right into your rainy day fund. You can have the money taken from your paycheck and deposited directly into your savings account, or you can set up recurring transfers that move money from your checking account into your savings account once a month.

In either case, the temptation to use the money for something else is removed; you don’t ever really have access to it in your checking account. And your savings account grows at a steady rate.

Look for High Yield Accounts

You won’t ever get really good rates on cash products. That is no excuse not to get what you can, though. High yield savings accounts offer better rates than more traditional accounts. This can help you increase the interest you earn, maximizing your money as much as possible.

You can also look for incentives, such as cash bonuses for signing up for certain accounts, and other perks. This will help you increase the value of your account without too much trouble.

Bottom Line

A rainy day fund is essential if you want to achieve financial freedom. It helps you cover unexpected expenses, and can aid you in the event that you lose some of your income. Don’t delay starting a rainy day fund, even if you don’t have a lot to put in it right now. The important thing is to get started, and develop a habit of preparing for the future.

Photo credit: bradipo

Published or updated March 21, 2012.
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{ 6 comments… read them below or add one }

1 Jaren

I say add your tax refund to your emergency stash if you can and forget about it! That’s what I’ll be doing.

The automatic savings deposit is also a way to make it painless.


2 Money Reasons

Well said, the key is just to start!

That how we started out with our contributions to the 529 fund for our kids (literally just $25 a month). Now we contribution $160 a month, and occasional lump sum transfers based on our bonus.

The key to start, even with rainy day fund 🙂


3 K.C.

The point of your post, that a person needs to have savings and get into the savings habit, is a valid one. The two examples you give as a reason for having a rainy day fund, car repair and medical co-pay, we account for in our regular budget. We don’t consider these to be unexpected expenses, although they may be unpredictable. Since we expect to incur these expenses, we budget for them monthly. We feel that this gives us a much more realistic picture of our financial condition. Money in these budget accounts accumulates over the months until we need it. It is savings, as you note, but it is targeted to specific expenses rather than included in a general emergency fund (rainy day fund).

The purpose for our emergency fund is to deal with an interruption in income, such as a layoff, reduction in hours or pay, medical disability, etc.


4 Bruce

It’s good to keep seeing this message getting out there. Saving needs to be taught at home and in school to all of our children so that it becomes automatic in their adult lives.

Whatever income I make, I pretend to make 10% less and live below that outcome. This is after I already allocated 15% of gross to retirement.


5 Jaren

Impressive, Bruce!

For the sake of learning, how do you divide up that 15%? A big 401(k) supporter or other avenues? Everything I’ve read says to put at least 10 percent into these tools, and 15 would be very impressive.

And yes, saving is another whole issue in itself. K.C. I’d love to hear more about your monthly budgeting process and how your family has become so detailed in your approach.



6 K.C.

Jaren – We have developed a very detailed budget over the last thirty years. While some people shy away from detail and prefer a simple, our experience has taught us that the more detail we have, the better the information our budget gives us. Better information leads to better decisions which permit us to be more efficient in the use of our money. We’ve never earned much more than the average for a two-income household, so the efficient use of our money has been very important to us. Our detailed budget allowed us to save a high percentage of our income over the years, stay out of debt, and enjoy a modest but comfortable standard of living.


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