Rainy Day/EF Fund

[wolfy]

I tried doing a search but didn't find anything. So if this has been asked before, I'm sorry and please point me to the right place.

I have made our budget up, and included money for an EF. I read somewhere though that you should have a Rainy Day fund (for car repairs, unexpected bills, etc) and only use the EF for things like job loss, or major medical problems.

I can do both but that would cut the amount I can put into my EF by 1/2 each month. And then the other half into a rainy day fund. Is it wise to set up two accounts like that, or just put everything into the EF for now until it is about 3 months worth and then start a rainy day fund. Any thoughts would be appreciated.

[bjl584]

Don't overthink the EF too much. You will end up with accounts all over the place.

If you are disiplined and organized enough to do so, just set up one account in a high yiled account (high is a relative term with current interest rates) and dedicate certain amounts of the account for certain purposes.

For instance, say you have an account with $50,000 in it. $25,000 of it is your EF. $20,000 of it would be for a new car. The remaining $5,000 is for fun money, vacations, gifts, charity. All that you really need to do is keep the account at or close to $50,000.

[ActYourWage]

When starting a budget, it is a good idea to keep things simple. Have just one EF and use for emergencies. The fund doesn't even need to have a high interest as that is not its primary concern. To start a basic EF, save up to $1000, then shoot for a 3-6 months (longer if you'd like). You can budget for things such as car maintenance, housing maintenance, etc. in your initial budget.

[BMEPhDinCO]

I really like my multiple accounts - I have: EF, Auto, House, Medical, Travel, Misc, Pet, and more based on needs...

But I started with just an EF and once that hit my "I can sleep at night" goal, I expanded to the others. So now, our EF is for big major, we've used up everything else, type stuff. But in the beginning, it covered everything. I would recommend you doing the same...build up to where YOU feel safe (3 months, 4 months, whatever YOU like) and then start one or more new accounts for the other stuff.

If you can look at a giant amount and divide it out (in your head, in Excel, whereever), then keep it in one account but for me it's easier to look at each account as available for a separate need and using Ally bank (other banks also do this) makes it easy.

You've already done the hardest part - recognizing the need for savings and starting down that path and that's great!

[HousingCounselor]

Have you tried opening an account on ING? They have a separator feature where you deposit all of your money into one account and then break it out into categories. Quite simply you could use a spreadsheet or a notebook to record your progress each month. Every time you make a deposit, you decide how the deposit will be broken up when contributing to certain funds.

[danieldroga]

If you are on a budget, you just have to managed your expenses first before getting to act on the less important thing like thinking about EF.

[wolfy]

Originally Posted by danieldroga

If you are on a budget, you just have to managed your expenses first before getting to act on the less important thing like thinking about EF.

Yeah we are on a budget and trying to stick thru it. But we realized we need an EF when we had a car repair that was almost as much as our budget for the month. We are budgeting money each month for car maintenance but there was only $25 in it when the car repair cropped up. Also I think an EF is very important especially since my wife is the sole income in our family. If her hours get cut more or loses her job we will be S.O.L.

Originally Posted by HousingCounselor

Have you tried opening an account on ING? They have a separator feature where you deposit all of your money into one account and then break it out into categories. Quite simply you could use a spreadsheet or a notebook to record your progress each month. Every time you make a deposit, you decide how the deposit will be broken up when contributing to certain funds.

I used to use ING for seperating any accounts. I may go back to doing that again. But I think for now I will keep everything in one account and use excel to keep track of it until I get enough money make it worth having more than one account.

[creditcardfree]

We have an emergency fund and a seperate account for non monthly expenses, specifically life insurance and auto premiums, auto registration, homeowner's insurance and real estate taxes.

The yearly amounts are added up and divided by 12 to get a monthly savings amount. Actually some are saved for twice per month, just to spread the savings over pay periods. I call it our escrow account, because it is essentially the same thing the mortgage companies do when they pay your insurance for you. This is, of course, not really emergency money, but a way to budget for those non monthly bills.

If we have a car repair, we first look to use any extra on hand from our current paycheck, then move to the emergency fund. Later we work to replenish the emergency fund.

[Fizgig]

I agree with having a sacrosanct EF which is only touched in true emergencies, and an "escrow" type account for predictable if infrequent expenses (taxes, insurance, etc). I have both, and even a 3rd that I call my "splurge" fund - that is for toys, vacations, etc.

[Eric80]

If i were you I would think about just keeping it in one account for now. For interest reasons, it makes sense to have 2 accounts so that you can build on the interest in each account however there may come a point where you will need to use both accounts to solve your unexpected problem in which case having 2 accounts seems pointless. Hope this helps