
6 Steps to building your rainy day fund
We have all been told that we need to have an emergency fund to help cover major life events like job loss or major illness. However what often happens is while you are busy saving for those things, smaller life events come up that cause you to dip into that account. That is where a rainy day fund comes in.
A rainy-day fund is where you will keep that thousand dollars that you often hear people in the personal finance space reference. Let’s dive into what a rainy day fund is and why you need it.
What is a rainy day fund?
A rainy-day fund is a pool of money set aside to cover unexpected expenses or emergencies. This fund is typically used to cover expenses that are not part of your regular budget, such as unexpected car repairs, medical bills, or that school trip your kid forgot to tell you about.
The purpose of a rainy-day fund is to provide a financial safety net so that you do not have to rely on credit cards, loans, or other forms of debt when minor unexpected expenses arise. By having a rainy-day fund, you can be better prepared for short-term financial emergencies and avoid the stress and financial strain that can result from unexpected expenses.

How much should you have in your rainy day fund?
The amount of money you should set aside in your rainy-day fund will depend on your personal financial situation and the level of risk you are comfortable with. I recommend that my clients have $1,000 in their fund but with inflation that amount has grown.
According to a recent study by Lending Tree, the average emergency expense has risen and is now between $1,008 and $2,042. These expenses include car repairs, emergency home repairs, and medical expenses.
It’s easy to see that with the rise in prices for these services, it’s imperative that we all have a buffer account for our long-term savings.
Without this buffer, it can feel nearly impossible to build your long-term emergency fund to a level that you are comfortable with. Before you become discouraged, below are 6 steps that you can take to build your rainy day fund with ease.
Six steps to padding your rainy day fund:
- Set a clear savings goal: Write down your savings goal of $1,000 and make sure it’s specific and achievable. Having a clear goal will help you stay focused and motivated.
- Create a budget: Track your income and expenses for a month and identify areas where you can cut back on your spending. Set a realistic budget and stick to it. You can use apps like Mint or YNAB to help you with budgeting.
- Automate your savings: Set up an automatic transfer from your checking account to your savings account each month. This way, you won’t have to worry about remembering to save money, and you’ll be less likely to spend the money you’ve saved.
- Cut back on unnecessary expenses: Evaluate your expenses and cut back on unnecessary ones. For example, cancel subscriptions you don’t use or buy coffee from home instead of at a cafe.
- Sell items you no longer need: Look around your home and identify items you no longer need or use. Sell these items online or at a garage sale to earn some extra cash.
- Use Windfalls: If you receive unexpected money, such as a tax refund or a bonus at work, put it towards your rainy-day fund.

What to do when life happens
As the old adage goes, “Life is what happens when you are busy makeing plans”. Once you’ve made the decision to start to build your rainy-day fund don’t be surprised when things pop up that may require you to use those funds earlier than expected. Give yourself grace and remember that you are building this fund for emergencies.
Make sure that you are not being too agressive with your savings. One of the fastest ways to abandon your savings is creating unsustainable goals. If you need to, pause or reduce saving to your emergency fund or redirect funds from another discretionary area until you’ve hit your $1,000 goal.
Track your progress
Now that you’ve got a stragegy and a clear understanding about why you need to have a rainy-day fund, you need a way to stay motivated. Tracking your progress is the best way to do that.
Studies have shown that tracking your goal progress increases the liklihood that you will hit your goals exponentially.
I’m a huge proponant of physical tracking sheets. There is something so very satisfying about crossing off a box as I make progress on a goal. Having a visual reminer also keeps me accountable to the goal that I set for myself.
There is a savings tracker that is perfect for this inside of the Liberty Budget Planner that is simple and easy to use. The best part is, it is free.