You might be asking yourself, “How does an emergency fund differ from my 401(k) and regular savings?” Easy. Unlike your 401(k), it’s used only for emergencies, like a sudden illness or loss of your job — and no, fashion emergencies do not qualify. It might not be fun, but having a rainy day fund is absolutely essential — and easier to build up than you think.
1. Set money aside. Putting money away can be painful. Set up an automatic deposit into your savings account each month so that you save without the pain. After all, you can’t miss what you never had.
2. Save your tax return. Instead of spending your tax return on the latest handbag or a fancy dinner with friends, stash part of it away in your emergency fund and use the rest on whatever you want. It’s an easy way to raise the balance.
3. Get a side job. Moonlighting as a copy editor, opening an eBay store, or getting a side gig as a bartender are all great ways to rack up cash. Not only will this give you a little extra spending money, but it will also help build up your emergency savings fund.
4. Holiday bonus. Part of your holiday bonus should be spent on treating yourself or paying off bills and part of it should be added to your rainy day fund. While it can be tempting to spend it all, it’s money you may need later down the road.
5. Keep a change jar. It might sound juvenile, but saving your change can add up quickly. Once the jar is full, take it to your bank and have them automatically deposit it to your savings fund.
Trust me, you’ll be happy you followed these simple ways to save money when you need that money on a rainy day.
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