Rainy Day vs. Emergency Funds
Even the best savings plan can be interrupted when something unexpected occurs. Establishing rainy-day and emergency funds will allow you to handle unexpected expenses that come your way. But what’s the difference between the two, and why are both necessary?
A rainy-day fund is money set aside for when random inconveniences strike. Automotive repairs, broken appliances, and last-minute travel emergencies hit when you least expect it; it’s important that you’re able to cover these costs without dipping into your checking account. You should try to set aside $1,000 - $2,000 for minor, unexpected events such as these.
An emergency fund is money saved to cover expenses if you find yourself out of work for an extended period of time. If you’re in-between jobs or get sick and can’t work, this fund can be used to support you. Building up around 6 months’ worth of income is a good rule of thumb, but you should save however much you feel is enough.
Whether illness strikes or your “check engine” light comes on, it’s important to ensure that you have enough money saved to tackle the issue. To learn more about AAA savings, money market and CD accounts by Discover, visit AAA.com/Deposits.
Discover Bank, Member FDIC