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Do You Have a Rainy Day Fund?


None of us know when a crisis is going to hit, and a job loss or sudden disability can be financially devastating. Financial professionals suggest you should have at least six months’ worth of living expenses readily available to meet urgent short-term needs. If you haven’t established a cash reserve, here are some steps you can take to build that rainy day fund:

  • Budget a savings amount as part of your regular household expenses.

  • Use payroll deductions so the money automatically goes into your savings account.

  • If you get a raise or bonus, put some of it into your fund.

  • Reduce your discretionary expenses and put it toward your fund.

  • Consider banking earnings from investments.

  • Set-up a money jar where change and small bills are put in at the end of each day.

  • Open a savings account at a different institution so you are less likely to spend the money.

You’ll want to make sure that your cash reserve is readily available when you need it. There are several accounts that you can use, including: a traditional savings account; a money market account, which typically pays higher interest tiered by balance; and short-term CDs. While you shouldn’t consider loans as part of your cash reserve strategy, if you have an immediate cash need and don’t have the funds, you can look at other sources such as an insurance policy with a cash value you can borrow from or a home equity or personal line of credit.

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