Rainy Day Funds
Rainy Day Funds
The unreliable Utah weather is a good reminder that unexpected financial events happen just as frequently as Utah changes weather patterns.
One of the best ways to dance through the storms of life instead of getting shaken by the thunder, is by having a rainy-day fund. A rainy-day fund is money set aside for unexpected lower-cost expenses like getting a parking ticket or coming home to a broken sprinkler.
Rainy-day funds are often confused with emergency funds. While both are created to help you weather the storms of life, each has a different purpose. A rainy-day fund is created to cover the small, unexpected events that come up month to month. That could be a small car repair, house maintenance, or parking ticket. It is recommended to have $500 to $1000 saved up in a rainy-day fund. You should feel at leisure to use your rainy-day fund when unexpected small events arise.
Emergency funds are larger than rainy-day funds. Experts recommend that you save three to six months of your monthly income in an emergency fund to cover an unexpected job loss, medical expense, or illness. This fund should only be accessed in an emergency that is unexpected and urgent.
Both types of funds provide peace of mind, knowing that you are covered in unexpected events.
While it’s intuitive to have a rainy-day fund or emergency fund, getting started can be hard. Here are some tips to help you start saving for a rainy day:
Start small. Although it’s recommended that you have $500 to $1000 set aside for a rainy day, you don’t need that much cash to start a rainy-day fund. Begin by setting aside $5 to $10 regularly. Small efforts over time create a large impact.
Create a separate account specifically for your rainy-day fund. There is an old saying, “Out of sight, out of mind.” Having a separate savings account for your rainy-day fund helps you keep the funds out of your mind when you are spending at a grocery store or in your day-to-day activities.
Automate your rainy-day savings. Most employers offer the option to automate your payroll into multiple savings accounts. Take advantage of technology by setting up automatic transfers from your checking account to a separate savings account. This way, a portion of your income will be saved before you have a chance to spend it. Treat your savings like any other bill and make it non-negotiable.
Reduce unnecessary expenses. Look for ways to trim your expenses and eliminate unnecessary luxuries. Evaluate your subscriptions, dining out habits, and entertainment expenses. Small changes in your daily routine can add up to significant savings over time.
Resist impulse spending. Before making a purchase, give yourself some time to evaluate whether it's a necessity or a fleeting desire. Avoid impulse spending and focus on long-term financial stability. Delayed gratification can lead to more substantial savings.
Saving for a rainy day requires discipline and consistency, but the rewards are immeasurable. By implementing these strategies and making saving a habit, you'll build a solid financial foundation that can withstand unexpected storms. Remember, every penny saved today is a step towards a brighter and more secure future. You can find Granite Credit Union’s savings accounts and rates here. Talk to one of Granite’s team members to find out what product will be best to help you build your rainy-day fund in person at one of our branches or over the phone at 888-GCU-Team.
