Q: Do I need to have a separate rainy day fund and emergency fund?
A: Rainy day funds and emergency funds serve different purposes. It’s important to have both available to tap into as needed. Read on for answers to all your questions on rainy day and emergency funds.
Why have a rainy day fund?
Say your washing machine suddenly needs replacing. You’re looking at an extra expense that can run anywhere from $350-$850. Where are you going to get that kind of money?
Here’s where your rainy day fund comes in. It’s a savings account created for these small, unfixed expenses that you know will sometimes arise. You’ll tap into your rainy day fund to pay for minor household repairs, to cover the cost of summer camp or to replace your broken kitchen table. When you have a way to fund these small financial hiccups, they won’t disrupt your financial health.
Why have an emergency fund?
In contrast to your rainy day fund, an emergency fund is for much larger expenses. It should have enough padding to keep you afloat even if you experience a major disruption in life like a divorce, job loss or illness.
How much money should be in each fund?
Your rainy day fund, created for minor expenses, only needs to hold $500-$1,000. That should be enough to tide you over in the event of a small, unfixed expense.
Your emergency fund, however, should be positioned to pull you through major financial crises, so it will need a lot more to fulfill its purpose. Ideally, it should hold 3-6 months’ worth of your living expenses.
Where should I keep these funds?
Your Wasatch Peaks Savings Account is a perfect home for both your rainy day fund and your emergency fund. You can even set up multiple accounts for each one. Your money is always safe here, and it will continue to grow. Best of all, you’re free to withdraw your funds without penalty whenever you need to do so.
How can I build my funds?
Start a side hustle. Freelance for hire, take online surveys for spare cash or accept a seasonal position. Keep all or most of the extra money you pull in for your rainy day and emergency funds.
Trim your budget. Take a hard look at where your money goes each month and cut back on your spending. Use the money you save to fund these accounts.
Make it automatic. Set up an automatic transfer from your checking account to your savings accounts so your funds grow automatically.
Visit or call our Pleasant View Branch at 801-476-6304 and speak with a representative to start building your savings today!
This material is for general information only and is not intended to provide specific advice or recommendations for any individual.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Wasatch Peaks Financial Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Wasatch Peaks Financial Services, and may also be employees of Wasatch Peaks Financial Services. These products and services are being offered through LPL or its affiliated, which are separate entities from, and not affiliates of, Wasatch Peaks Financial Services. Securities and insurance offered through LPL or its affiliates are not insured Wasatch Peaks Financial Services deposits and are not NCUA insured. These products are not obligations of Wasatch Peaks Financial Services and are not endorsed, recommended or guaranteed by Wasatch Peaks Financial Services or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.