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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Reza Estakhrian/Getty Images January 12, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. What is a rainy day fund
A rainy day fund is money that’s set aside for unexpected and lower-cost expenses, like home maintenance or parking tickets. A rainy day fund is slightly different from an . The main differences are the size of the fund and what they’re used for. A rainy day fund is for smaller unanticipated expenses, such as buying new tires or paying to repair a home appliance. An emergency fund is reserved for unexpected events or major life changes, such as a job loss or divorce, that can have severe consequences on your finances. It’s smart to have both a rainy day fund and an emergency fund. Expenses your rainy day fund should cover
Use your rainy day fund to cover smaller expenses — like car repairs or fixing a furnace — that could force you to open your wallet when you least expect to. Other examples include: Medical procedures. Doctor or vet visits. Replacing a broken windshield. Fixing a broken appliance. Vehicle maintenance. Where to keep your rainy day fund
Keep your-rainy day fund in an account that’s easily accessible, such as a . Find an that allows for quick and fee-free withdrawals. This way, you’ll earn some interest on your money but will be able to access it at a moment’s notice. How much money to put in your rainy day fund
The recommended amount to keep in a rainy day fund is $500-$2,000. However, it will vary based on your individual circumstances. And remember: This account does not need to be as big as your emergency fund. Rainy day fund Emergency fund Recommended savings $500-$2,000 3-6 months’ living expenses What it covers Small, unexpected expenses Large, unexpected expenses or major life changes Where to keep it High-yield savings account High-yield savings account To figure out how much to put in your rainy day fund, do an assessment of what might go wrong in your life and how much it will cost to fix it. Michael Kelly, CFA, CFP, president and founder of Switchback Financial in Madison, Connecticut, says much depends on your own personal financial situation. “For example, if you own a house, there is a lot more that you will need to replace if broken or worn down (such as) appliances, a boiler, an A/C unit or a driveway, whereas renting this is covered. Additionally, it depends on the amount of insurance coverage you currently have. Having high deductibles on your , for instance, means you would need cash to cover that deductible and would require more on the rainy day fund.” When forecasting for rainy days, consider the rest of your family, too. If you have children, a rainy day fund may help pick up the bill for a doctor’s visit that isn’t totally covered by insurance. It may also be used to cover the cost of a medical procedure for your pet. What experts say about rainy day funds
, CFA, Bankrate chief financial analyst: “Consistent contributions to savings are essential to being prepared for all life throws at us. Because savings may fluctuate due to one-off, even relatively minor, expenses, it is important to replenish this so you’re adequately saved for unplanned expenses large or small, or even opportunities that present themselves.” , CFP, founder of Financial Staples: “If you’re unsure of what costs could be covered by a rainy day fund, make note of overlooked expenses as they occur. You can also look back at your expenses over the last year to see what costs could fall into this category. Be sure to replenish the funds after you use them so you have cash for the next time.” , CFP, senior wealth manager at LourdMurray: “A rainy day fund is essential for everyone — no matter what life stage you are in or how big your . A rainy day fund, like an umbrella, provides cover for life’s inevitable rainy day. Whether it’s tomorrow or a year from now, a rainy day is bound to come, so it’s best to properly prepare for this with an adequate amount of cash in a highly liquid account.” , CFP, managing principal and founder of Felton & Peel Wealth Management: “I am a big fan of rainy day funds because they add just another layer of protection to your nest egg. Subliminally, most Americans might already have some funds set aside for those rainy days. But in most cases, those funds are sitting in a , earning nothing. By taking advantage of the higher rates inside a high-yield , even your rainy day fund can see some sunshine!” SHARE: David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Related Articles