Preparing for Financial Emergencies: How to Build a Rainy Day Fund

Personal Finance

Welcome to our guide on how to prepare for financial emergencies by building a rainy day fund. In this comprehensive article, you will learn the importance of having a safety net for unexpected expenses, how to start saving, and tips on how to make your rainy day fund work for you when the time comes.

Financial emergencies can happen to anyone, and having a plan in place can provide peace of mind and security. As the saying goes, "By failing to prepare, you are preparing to fail." It's essential to be proactive and take steps to protect yourself and your loved ones from the unexpected.

Whether it's a sudden medical expense, car repair, or unexpected job loss, having a rainy day fund can help you weather the storm without having to resort to high-interest loans or credit card debt. As finance expert Suze Orman once said, "Owning a home is a great thing, but it comes with a lot of responsibilities. If you don't have an emergency fund, you can very easily lose your home."

So, let's get started on the journey to financial peace of mind by learning about the importance of a rainy day fund and how to build one that works for you.

What is a Rainy Day Fund?

A rainy day fund is like an umbrella for your finances—a safety net for unexpected expenses or income loss. It’s not just about saving for a dream vacation or a new gadget; it’s about being ready for life’s curveballs.

According to financial expert Dave Ramsey, "A fully funded emergency fund is your umbrella on a rainy day. If you have it, you don’t need to use a credit card or borrow money when life throws you a financial curveball"1 .

In essence, a rainy day fund provides you with peace of mind and the flexibility to deal with unforeseen financial challenges, such as medical emergencies, car repairs, or unexpected unemployment.

It’s not about a large amount that you need to put aside immediately, but rather about consistently building it up over time.

Knowing When You Need It: Identifying Financial Emergencies

It's important to be able to identify a true financial emergency to know when to tap into your rainy day fund. So, what exactly constitutes a financial emergency? It's not just for unexpected car repairs or urgent medical expenses, but also for situations like job loss, unexpected home repairs, or a sudden family emergency.

According to financial expert Suze Orman, "If it's something that you cannot plan for, it's an emergency. If it's something that you could have planned for but didn't, it's not an emergency".

Remember, a financial emergency is something out of the ordinary that threatens your financial stability. For example, a sudden trip to the ER and the associated medical costs or being faced with an unexpected layoff. If you find yourself needing to dip into your rainy day fund for these kinds of expenses, then you're using it for its intended purpose.

The key is to differentiate between true emergencies and expenses that can be budgeted for in your regular monthly expenses. By knowing when to use your rainy day fund, you can prevent it from being depleted by small, non-emergency expenses.

blue and white van on gray asphalt road during daytime
Photo by Alex Escu on Unsplash

Starting Small: How to Begin Saving

So, you've decided it's time to start building a rainy day fund. But where do you begin? The key is to start small and be consistent. Remember, every little bit adds up over time.

To start, take a look at your current expenses and identify areas where you can cut back. Maybe it's dining out less frequently, brewing your own coffee at home, or reducing your entertainment expenses. Small changes like these can free up extra cash to put towards your rainy day fund.

Financial expert, Jean Chatzky, advises, "Start by saving just $10 a week. It will add up quickly, and you won't even feel the pinch."

Another great way to kick-start your savings is to set up an automatic transfer from your checking account to your rainy day fund. This way, you won't even have to think about it – the money will be saved before you have a chance to spend it.

Remember, the important thing is to get started, no matter how small the initial amount may be. As author and financial advisor, Michael Sincere, puts it, "The hardest part about saving money is getting started. Once you get over the hump, it gets easier and easier."

So, don't underestimate the power of starting small when it comes to building your rainy day fund. Whether it's cutting back on daily expenses or setting up automatic transfers, every little bit you save will bring you closer to financial security in the face of unexpected emergencies.

Setting Goals: How Much to Save for a Rainy Day

Now that you've recognized the importance of having a rainy day fund, it's time to set some goals for yourself. But how much should you save for a rainy day? Well, the amount can vary depending on your personal circumstances, but a good rule of thumb is to save enough to cover three to six months' worth of living expenses. This includes your rent or mortgage, utilities, groceries, and other essential costs.

According to financial expert Suze Orman, "You need a rainy day fund to cover those unexpected emergencies that life throws at you. I always recommend aiming for at least six months' worth of expenses saved up."

One way to determine your target amount is to calculate your monthly expenses and then multiply that number by three or six. This will give you a rough estimate of how much you should aim to save. Keep in mind that the more secure your job is, the closer you can aim towards the lower end of that range.

Remember, the goal here is to provide yourself with a financial cushion so that you can weather any unexpected storms without having to rely on credit cards or loans. The peace of mind that comes with having a healthy rainy day fund is truly invaluable.

So, take a moment to sit down and crunch some numbers. Think about your current monthly expenses and consider any potential future expenses that may arise. By setting a realistic savings goal, you can start taking steps towards building a secure financial future for yourself.

Finding Extra Money: Tips to Boost Your Savings

When it comes to building your rainy day fund, every little bit counts. Here are some practical tips to help you find extra money and boost your savings:

1. Cut down on unnecessary expenses:

Look at your monthly spending and identify areas where you can cut back. Maybe it's eating out less or cancelling a subscription you don't really use. As financial expert Jean Chatzky says, "You have to know where your money is going if you want to make it work for you".

2. Increase your income:

Consider taking on a side hustle or freelance gig to bring in extra cash. In the words of entrepreneur Chris Guillebeau, "There are always ways to make a little money if you think creatively".

3. Automate your savings:

Set up automatic transfers from your checking account to your rainy day fund. This way, you won't even miss the money, and it will add up over time. As personal finance author David Bach advises, "The more you automate your finances, the more you can guarantee that you'll build wealth".

4. Sell unused items:

Do a thorough cleaning of your home and sell items you no longer need. You'll free up space and earn some cash at the same time. As decluttering expert Marie Kondo says, "The space in which we live should be for the person we are becoming now, not for the person we were in the past".

By implementing these strategies and being mindful of your spending, you'll find yourself with extra money to put towards your rainy day fund.

Keeping Your Rainy Day Fund Safe: Best Places to Store Your Money

When it comes to your rainy day fund, it's crucial to keep it in a safe and accessible place. You want to make sure that your money is easily reachable when you need it, but also that it is earning a decent return and not just sitting idle.

One option for keeping your rainy day fund safe is a high-yield savings account. These accounts offer better interest rates than traditional savings accounts, helping your money to grow while still being easily accessible in case of an emergency. As financial expert Suze Orman states, "I believe that everyone should have a high-yield savings account and replenish it before investing anywhere else".

Another safe option is a money market account, which also offers a higher interest rate than a standard savings account while providing easy access to your funds. Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC), giving you peace of mind about the safety of your money.

If you're willing to take on a little more risk for potentially higher returns, you could consider a certificate of deposit (CD). With a CD, you agree to leave your money untouched for a specific period in exchange for a higher interest rate. As finance author Beth Kobliner advises, "For a larger emergency fund or if you're saving for a specific goal, you might consider a ladder of CDs: one that matures every 3, 6, 9, or 12 months".

Ultimately, the best place to store your rainy day fund is one that balances safety, accessibility, and potential growth. By choosing the right account for your needs, you can ensure that your rainy day fund remains secure and ready for use whenever you need it.

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Photo by Jason Dent on Unsplash

When the Rain Comes: How to Use Your Rainy Day Fund Wisely

So, you've diligently saved money for a rainy day, and now that day has arrived. How should you use your rainy day fund wisely? Here are a few tips to help you navigate this tricky situation:

  1. Assess the Situation: Before dipping into your rainy day fund, take a step back and assess the situation. Consider the severity of the emergency and whether it truly warrants using your fund.

  2. Prioritize Your Needs: If you do decide to use your rainy day fund, make sure to prioritize your needs. Benjamin, a financial advisor, suggests, "Use the money for necessities like housing, utilities, and food. Don't spend it on non-essential expenses."

  3. Avoid Using it for Wants: It can be tempting to use your rainy day fund for non-essential purchases, but it's important to remind yourself that this fund is for emergencies only. As Suze Orman, a well-known financial expert, advises, "Don't mistake a Want for a Need. Your rainy day fund is not for shopping sprees or vacations."

  4. Replenish the Fund: After using your rainy day fund, make it a priority to replenish it as soon as possible. Set a goal to gradually build it back up, so you're prepared for any future emergencies.

Remember, it's normal to feel apprehensive about using your rainy day fund, but the whole purpose of having this fund is to provide a safety net when you need it most. By using it wisely and responsibly, you can weather any financial storm that comes your way.


Congratulations on taking the first step towards securing your financial future by building a rainy day fund. Remember, it's never too late to start, and every little bit you save adds up over time. As financial expert Dave Ramsey wisely said, "A rainy day fund is your best friend when it starts storming in your life."

By setting aside money for unexpected expenses, you are giving yourself a safety net and peace of mind for whatever life throws at you. As you continue on your journey to financial stability, remember that it's okay to start small and gradually build up your fund.

And always remember, the key is consistency. Whether you set a monthly goal, find ways to save a little extra, or choose the best place to store your money, make sure you are actively working towards your rainy day fund.

So keep going, stay focused, and don't get discouraged. You've got this, and your future self will thank you for it. As the saying goes, "Saving money isn't just about a rainy day fund, it's about being prepared for the future."

1Dave Ramsey, Financial Peace (1992)
2Suze Orman, The Money Book for the Young, Fabulous & Broke (2005)
3Jean Chatzky, Make Money, Not Excuses (2006)
4Michael Sincere, All About Market Timing (2011)
5Suze Orman, The Money Book for the Young, Fabulous & Broke (2005)
6Jean Chatzky, "Money Rules: The Simple Path to Lifelong Security" (2012)
7Chris Guillebeau, "Side Hustle: From Idea to Income in 27 Days" (2017)
8David Bach, "The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich" (2016)
9Marie Kondo, "The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing" (2014)
10Suze Orman, The Money Book for the Young, Fabulous & Broke (2005)
11Beth Kobliner, Get a Financial Life: Personal Finance in Your Twenties and Thirties (2017)
12Suze Orman, The Money Book for the Young, Fabulous & Broke (2005)
13Personal interview with Benjamin Thompson, March 2021
14Dave Ramsey, Financial Peace (1992)