“It doesn’t really have a purpose,” she says. Scharr-Bykowsky calls this the “savings blob.” Many people throw extra money into a single savings account and pull from it whenever their checking account balance runs low, Kinney says. “When our goals are more visual, we tend to save more,” she says. Scharr-Bykowsky says creating funds with specific intent can help people save. ![]() “For maximum peace of mind, you want to have enough in each bucket to cover the largest expense we can reasonably expect in that category,” Kinney says. ![]() If you have direct deposit, Scharr-Bykowsky recommends automating your savings by funneling a portion of your paycheck into the savings buckets. You can start small with just a few dollars a month. Get in the habit of socking away part of your monthly income into each of your savings funds. Withdrawing money on short notice can result in penalties or even financial loss. ![]() You can use a regular savings account or a money market account - both allow ready access to your cash if you need it, but a money market account may include the ability to write checks.Ĭertificates of deposits and investment accounts aren’t ideal for storing rainy day or emergency savings. Kinney and Scharr-Bykowsky recommend setting up multiple savings accounts, one for each category. In addition to car maintenance or house repairs, this could include kids’ braces or veterinary bills. Make a list of the expenses you’ll probably have to pay in coming years. Other costs are less frequent but not technically emergencies. For most people, monthly expenses such as house payments, utilities, insurance and groceries stay steady. Quick access to that money is crucial.Ĭreating a rainy day savings strategy starts with getting a handle on any future expenses. You can start a separate bank account to build up an emergency fund to cover unexpected expenses. In fact, I could be absolutely certain I’m going to need a car repair, I just don’t know when.” “I know there’s a good chance I’m going to need a car repair. “In reality, most of these small emergencies are to some extent predictable,” Kinney says. These include occasional expenses you can anticipate, such as car repairs, routine medical expenses and home maintenance. James Kinney, a financial planner in Bridgewater, New Jersey, recommends covering smaller financial hiccups with a rainy day fund. Divorce, job loss or unexpected medical expenses would fall into that category. Think of it as two approaches: saving for a rainy day or for a large, unanticipated emergency.Įmergency funds, which ideally provide a three- to six-month cushion of living expenses, are reserved for events that can seriously upend your financial life and are harder to anticipate. ![]() It’s important, however, to distinguish between expected and unexpected expenses. So a savings fund is crucial for when emergencies strike. For many, a few hundred dollars is enough to tip the scale into debt. That’s relatively rare in America: A recent Federal Reserve Board report found 44% of adults had to sell something or borrow money to pay for an emergency costing $400. While she avoided the major damage many people experienced, the money she had tucked away for home maintenance allowed her to pay for the $250 in repairs without much sacrifice. When Hurricane Irma hit the South Carolina shores in mid-September, financial planner Laura Scharr-Bykowsky, who lives inland in Columbia, lost three cypress trees in her yard. Marquette Education Foundation Scholarship Program.
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