How to Start a Rainy Day Fund

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how to start a rainy day fund

A large part of being financially healthy is making sure that you have enough money set aside to help you get through rough times and small inconveniences. Having these extra reserves allows you to cover surprise expenses without going into serious debt. Consumers often refer to these extra reserves as emergency savings or rainy-day funds.

Rainy-days will happen. You may have to come up with extra cash for a medical bill or an auto repair. Preparing in advance can make you financially resilient when life throws you a curveball. If you need cash along your journey, you can lean on our 0% annual percentage rate (APR) InstacashSM advances.

Why you need a rainy-day fund

A rainy-day fund helps you cover short-term emergencies. Having these extra funds can minimize the likelihood of getting into debt and disrupting your monthly budget. For instance, if you earn $6,000 per mo and spend $4,000 per mo, you don’t have enough room in your monthly budget for a $10,000 emergency. The thought of covering that much ground can feel overwhelming, but a rainy-day fund can give you the financial resources you need to avoid any additional disruptions.

What’s the difference between a rainy-day fund and an emergency fund?

A rainy-day fund is optimal for short-term emergencies. These emergencies have costs that can quickly get resolved. Emergency funds are for long-term emergencies that can incur financial costs for several months. Both funds help you cover a surprise expense that requires immediate attention, but the duration of the emergency distinguishes these two types of funds.

Tips on how to start a rainy-day fund

Creating a rainy-day fund gives you extra financial flexibility when surprises strike. You can use these tips to fortify your rainy-day fund.

1. Make a budget

Budgeting helps you see what goes in and what goes out. To make a budget, list all your expenses in categories such as rent, utilities, food, transportation, entertainment, and savings. Separate your expenses into wants and needs, and make sure you pay for your needs first.

Compare your expenses against your income each month. Making a budget means you know how much you can afford, how much you can save, and what areas you can cut back on to reach your goals. You can get started today with a blank sheet of paper or a free budgeting template online.

You’re on the right track as long as you’re putting something — anything — away from every paycheck. The most important thing you can do is make saving a habit. Even if you can only save $1 per week right now, do it. Progress gets you moving in the right direction and can ignite more progress in the future.

Setting a goal for your rainy-day fund can strengthen your commitment to stick with the budget. If that’s $100 or $1,000, you’ll need to budget so you can allocate extra cash to your rainy-day fund.

2. Pick one nonessential expense to cut

When you make your budget, you may discover opportunities to make a few cuts to save money fast. The great thing is that you don’t have to make all of the cuts right away. Everyone has an expense they can remove, knowing the money is better off saved. If you get a coffee at the drive-through every day or get your nails done every week, or maybe you always forget to bring your lunch to work and end up spending money at the cafeteria.

Whatever your guilty pleasure or mindless expense is, make a resolution to stop spending and start saving it instead. One of our members saved $1,400 in a year just by skipping her daily iced coffee run.

3. Take advantage of financial tools

The MoneyLion app is full of resources to help you save money. From providing daily personalized savings tips to financial education, it gives you everything you need on your financial journey. 

The MoneyLion app also gives you tools to get more from your money, a key step to building your rainy-day fund. MoneyLion also provides 0% APR Instacash advances, so when you need extra cash, you won’t have to touch your savings.

4. Put savings on autopilot with auto invest

Savings accounts can provide some interest, but you could also help  build your rainy-day fund by having funds automatically deposited to an investment account. Consider assets like stocks and bonds that also have the potential to get mileage out of your money.

MoneyLion makes it easy to invest on autopilot. You can sign up for a fully managed Investment Account with MoneyLion and let us help grow your investment portfolio. 

5. Generate additional income

Generating additional income can help you build your rainy-day fund sooner. If you want to save for a $1,000 rainy-day fund, making an extra $100 each week with a side hustle will get you there in 10 weeks. Picking up extra side hustles will also expand your skills, and some of those side hustles can become full-time work. You can also explore career opportunities that offer more money or ask your employer for a raise. 

Making extra money is one of the best ways to grow your rainy-day fund, emergency fund, and portfolio. Trimming expenses will help, but you will eventually reach a limit. Focusing on income growth expands your possibilities and makes it easier to achieve key financial goals. 

Download the MoneyLion App to View Videos and Playlists on Side Hustles

6. Explore the SteadyIncome Portfolio

Don’t like to take risks when investing? Consider MoneyLion’s SteadyIncome Portfolio. This very conservative portfolio allows you to invest in bonds through exchange-traded funds (ETFs). Bond ETFs are ideal for those who prefer to invest with stability and low costs. You can still earn interest while minimizing risk.

Here’s how to invest in SteadyIncome once you’ve opened a MoneyLion Investment account:

  • Select “Finances” on your MoneyLion app.
  • Select “Portfolio.”
  • Tap on the “Edit Allocation” button.
  • Use the risk slider to choose “SteadyIncome.”

7. Help your money grow

If you opt for a savings account that earns you little interest, you could actually be losing money over time. Your money loses spending power in a savings account because of rising inflation. Investing helps to grow your money over time, and investing over longer periods gives your money more time to grow because of compound interest.

Investing and purchasing crypto currency is subject to risk of loss, including loss of principal.

Also be sure to read our blog on 6 Tips to Get Started on a Rainy Day Fund

Make your money work smarter, not harder

MoneyLion makes it easy to help save and invest your money so you can achieve your financial goals. The app provides you with everything you need with personalized tools, tips, and offers to control every money moment in your life. 

Download the app here


How can you prevent yourself from dipping into your rainy-day fund for non-emergencies?

You can review your budget and look for opportunities to reduce your monthly expenses. This approach will make you more conscious about how you spend your money and allow you to keep more of what you make.

How often should you review and update your rainy-day fund?

You should review and update your rainy-day fund at least once per month.

Is a rainy-day fund still necessary if you don’t have a stable income?

A rainy-day fund is still necessary even if you do not have a stable income. Surprise expenses can still come up regardless of your income.

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