Life is full of unknowns—from the weather to a flat tire on your car. While there are some things you can’t prepare for there are others you can.
Creating an emergency fund, or a rainy day fund can help you feel less stressed when an unknown or the unexpected hits.
A good goal is to keep 3 months’ worth of expenses in a separate savings account. So first you will have to determine what expenses are for one month. Monthly’ expenses are those such as rent, insurance, groceries and loan payments (school and car), utilities, and travel expenses like gas for your car or fare for public transit.
Use this chart to help you calculate your monthly expenses.
|EXPENSE ITEM||MONTLHY COST OF EXPENSES|
|Gas Bill (for the home)|
|Gas (for car)/ fare for public transit|
Here are a few situations in which a rainy day fund might need to be used:
- Unanticipated medical expense
- Losing your job/between jobs
- Major home repair
- Major car repair
Keep in mind, that when it comes time to access your emergency account you should think twice before making an unnecessary purchase like a new TV, or heading out to a fancy dinner and a movie.
Remember your emergency funds should not be used for anything, but a true emergency. NO new clothes and NO trip to Cancun for spring break (no matter how much of an “emergency” you think it is).
Look into opening a savings account with airbanking to start your rainy day fund.