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Building an emergency fund or saving for "rainy days": what's the difference? It's always good to have some extra cash for unexpected life-changing events. Whether it’s a one-time occasion or a sudden job loss, you have to be protected and definitely stay away from debt. Let’s dive deeper and see how to save some money for a rainy day or an emergency fund. First, we have to markdown the differences between a rainy-day and an emergency fund. 

A rainy day fund is basically meant to be to cover an emergency one-time payment: a medical bill, auto-payments, tax returns, or other unexpected expenses. A rainy-day fund helps you to stay away from taking extra loans. Once you realize, that having a rainy-day fund is essential, the next step will be setting up it properly. First, you have to identify how much money you need to save. A rainy-day fund will typically be $1,000 to $5,000. Assuming, the amount is $3,000 - then you have to save 250$ every month so in a year you’ll have your safety cushion. Keep saving that amount for years and here you go - you have your emergency fund.

Emergency fund is usually about $10,000 to $15,000. Ideally, it should replace you a three-month salary. Simply, multiply your current salary by 3 and you’ll figure out your emergency fund amount. Three months is an average period to recover from tough life circumstances, so make sure you have that minimum amount. Of course, more is better. 

As we’ve mentioned earlier, an emergency fund is meant to be for something crucial and should help you to maintain your lifestyle while you got through some emergency in your life like illness, someone's death, a job loss, etc. Keep in mind that the emergency fund is for emergencies. That means don't spend it on celebrations, vacations, shopping, or something else - you’ve got an idea.

How to build a habit of saving every month? If you haven’t yet, get a savings account. Ideally, you should use a different from your regular checking bank account. So having access to your savings account won’t be that easy, and you’ll use it when you really have an emergency expense. Make sure your account is federally insured - typically, savings accounts are federally insured up to $250,000. Watch out for being charged extra, check interest rates and fees - you don’t want extra expenses while your goal is to save money instead. You also want to choose the most convenient bank with user-friendly features like easily having access to your account with available checking and savings balance, having a dedicated person to resolve any problems you might have, etc. Trust your bank, so you’ll enjoy saving your finances with confidence. 

If you have some money left at the end of the pay period, move it to your emergency fund right away. Analyze where your money goes every month: whether it's a daily cup of coffee, eating out every lunch, or a regular dining at the restaurants. All these daily expenses could easily roll over $1000. Isn't it better to invest in your savings account instead?

Build a habit of being consistent, disciplined and prompt. Remember the main reason for saving money for a rainy day and building emergency funds is to avoid borrowing. More money you save, less chances you’ll get in debt. Nothing feels better than feeling safe, confident, and insured. Have a happy saving!

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