Creating a Rainy Day Savings Routine You’ll Stick To



Winging it is not a strategy when it comes to building rainy day savings for a financial emergency. Here’s what to do instead.

Unexpected bills and other emergencies can catch you off guard if you’re not financially prepared. That’s why having rainy day savings in place is important for your peace of mind.

Even if you’re new to the idea of having a savings account, there are ways to create a savings routine you can stick to.

Read on to learn how to build your emergency savings fund in a simple way so you can be prepared for whatever comes next.

How Much Money Should You Save Each Month?

There isn’t a specific amount when it comes to how much money you should dedicate to depositing into your rainy day savings account. The best way to create a habit is to have a certain amount of money automatically transferred from your checking account directly into the savings account of your choice.

Most banks have a feature to set up automatic transfers. You can have them weekly, bi-weekly, or monthly depending on your pay schedule and your own personal preference.

rainy day savings
Featured Photo by Michael Longmire on Unsplash.

The amount you choose to put away will vary. If you live paycheck-to-paycheck and have little room for spending, you may want to evaluate your current budget. Look for ways you can save, like canceling a streaming or cable TV subscription, and then put that amount automatically into your savings account.

Another strategy for saving is to dedicate a set percentage of your paycheck to your savings. This percentage can be as small as one percent, or as large as ten percent or more. The percentage that you choose depends on how much disposable income you have or how quickly you want the account to grow.

Remember, you can always tweak and change the amount of money you put into your savings. If times get tough or you need extra cash one month, simply adjust the amount until you’re back on track. It’s important to try and go back to the original amount to go into your savings once your finances are back to normal, however.

What Should Your Total Be for Rainy Day Savings?

The total amount of money you should have set aside in a savings account will depend on your lifestyle and your obligations. Ideally, you should have around three months’ worth of pay set aside for emergencies. This should be enough money to get you through lean times.

Homeowners may need to save more cash than people who rent, especially if they’re paying more per month for living expenses. If you own a car, you should also factor in things like emergency repairs as part of your savings strategy.

For people without health insurance, a rainy day savings fund is especially important. This money will cover you if you need to see a doctor or you end up in the emergency room unexpectedly. It can also be used to pay for things like new eyeglasses and other health-related expenses.

Parents might consider creating a savings account that includes emergency cash for their children. For example, if your child needs braces or has an expensive field trip coming up, you’ll have the extra money on hand to cover it.

Everyone is different, and every person will have a different savings goal. For some, it simply means having enough money to cover household bills for around three months in case of a job loss or layoff. For others, it could mean having cash on hand to pay for household repairs, deal with vehicle issues, or cover the cost of health-related expenses.

Once you have a clear picture of why you need the fund, it’s easier to set a goal. After you’ve reached your goal, you can let the savings account work for you by choosing a high-interest account or another investment plan. 

Develop a Savings Strategy

When you have a savings account, try to set something up that will make your money work for you. A simple savings account that’s attached to your checking account is easy to maintain, but it might not pay you a decent amount of interest like some other accounts.

Shop for rates and try to find a high-yield savings account. These accounts offer a higher rate of return and use a compounded formula which means that your money will continue to grow every time you make a deposit and reach the end of the statement cycle.

A high-yield account will grow much faster than a traditional savings account which means they’re a much wiser option. Do your research and try to find a provider that has competitive high rates so you can increase the balance of your rainy day savings every month.

Another option to help your savings grow is to invest in a money market fund. This short-term investment can offer a high rate of return with low risk and a short timeline.

Money market funds use your cash to generate income and then pay you a return at the end of the maturity date. These types of funds are meant to be used in the short-term, but they’re a great way to get some extra cash for your savings account while you wait for it to grow.

Some examples of money market funds include certificates of deposit, treasury funds, and municipal bonds. Do some research to determine if this type of option will work for you and how much you could gain when all is said and done. Once the fund has matured, transfer your new amount of cash into a high-yield savings account to let it grow even more.

When to Start Saving

You may wonder when a good time is to start your rainy day savings plan. If you have a lot of debt, it’s best to try and pay it off or at least pay it down before you dedicate your cash to a savings account. This will help you in a time of emergency since you won’t need to allocate your savings toward the debt.

It’s not always possible to pay your debt off completely before you start to save. If you prefer, just start squirreling away a small amount of cash each month and then increase it once your debts are paid down.

Photo by RODOLFO BARRETO on Unsplash

For some people, putting the focus on emergency savings is the top priority. If you’re a single parent with young children, a rainy day fund might be more important to you than worrying about your retirement savings.

Young people should try to have a healthy balance of savings and investments. This will give you a valuable nest egg you know you can rely on in the future. Remember that the sooner you start saving, the faster your money will grow.

Once you develop a personalized savings strategy, it’s much easier to stick to a routine. After a while, you probably won’t even notice the amount of money that goes into your new rainy day account. 

Bottom line

Whether you’re young and single, have a growing family, or nearing retirement, everyone should have a rainy-day savings plan for emergencies. Having a savings account will give you peace of mind in knowing that you’re covered whenever unexpected costs pop up.

Make your money work for you by choosing high-yield accounts, money market funds, or by splitting some of your cash and putting it into investments. The sooner you start to save, the faster you can watch your account grow.

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