7 Tips to Build a Rainy Day Fund

By Noah Henry  •  June 23, 2014

Since 2011, Bankrate has annually run a study that reveals Americans’ average emergency savings. The results have been essentially the same each year—67 percent of people have less than six months’ saved up, and more than a quarter have no emergency savings at all. Of course, there could be a list of reasons for this: inflation, bad spending habits, a drop in employment, etc. Understanding that millions of people don’t have enough money to cover three months of expenses is truly unsettling.  

Saving money for an emergency is one of the most responsible things you can do. You never know when an appliance might break, a sudden illness might come, or—god forbid—you get terminated from your job. Life is dangerous, and there may be no one there to help when something unfortunate occurs, so it’s wise to learn to save for these inevitable moments. Here are a few tips to build a rainy day fund in case life decides to take a turn for the worse.


Tips to Build a Rainy Day Fund


Build slowly. Like trying to lose weight, you don’t always see the results right away. It’s best to strike a balance between your fixed expenditures and your savings goals. Even $20 a week adds up to $960 in a year. If you’re serious about building your emergency funds, you should even save those occasion paydays, be it a tax refund, a holiday bonus, or a birthday check in the mail. By doing this, you will watch your savings soar.

Automate, automate, automate. Most of us who have an online bank account have the ability to automagically set aside money on scheduled basis. I put away $50 on the 1st of every month at Wells Fargo, and I have been doing this since 2010. It’s like a regular insurance or credit card payment, except in this case, I pay myself. It’s been nice seeing this fund grow steadily through the years.



Create a psychological barrier between your savings account and spending account. We all cheat. I’ve occasionally slipped and used my rainy day fund for a decidedly sunny day, when I’ve treated myself to an expensive lunch or a cool new gadget. And I’ve always regretted it. It is necessary to separate these accounts entirely, whether you want to diversify with an online account, savings bonds or a physical lockbox. If you don’t, the lines may become blurred over time and you might think it makes no difference to spend emergency funds on something you feel you need in the moment.

Sell everything you can. Material possessions tend to lose their luster with time. Selling them when you have no use for them should be a priority for everyone. Many of us have a cluttering of junk in our homes, and it doesn’t take much to throw a yard sale or sell on Amazon or eBay. By selling everything you don’t need, you get a hefty payment in return, as well as some much needed decluttering in the process.  



Consume intelligently. Every time you spend your money make sure it’s a worthy investment. This applies not only to food, but other products that save you money. The average household spends $6,132 on food every year according to the Bureau of Labor Statistics. That’s $3,465 on groceries and $2,668 eating out. Cut the dining out statistic in half, and you save more than one thousand over a year. In addition, be sure to research coupons before every online purchase. It’s basically a crime to spend more than have you have to. Cut it out!

Control impulse spending. I recently wrote a post suggesting tricks to curb impulse buying. People spend $200 a month on average on unplanned purchases. If you take these out of the equation, you save $2,400 in a year.

Buy a five-gallon jug. A lot of us come home after a long day with spare change in our pocket. Put a five-gallon jug near your door and add to it every time you come home. Growing up, my brother had a jug in which he deposited change almost every day. After a few years, the jug was worth about $500. Tossing your change into a piggy bank is better than likely spending it on gum, soda, coffee or any other significant purchase. Keep the change. 

Noah Henry Noah Henry Noah Henry is an amateur movie critic, foodie, bowler, and beer reviewer. But he's no amateur when it comes to saving money, so listen up!

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