Save for a rainy day: 5 myths about emergency funds

September 02, 2020

It’s one of the best things you can do for your financial future, but fewer than half of American households have an emergency fund. Good news: It’s easier than you think to start saving for a rainy day. Here are five common beliefs that shouldn’t stand in your way.

 

Still curious why we are calling this a rainy day fund vs. an emergency fund? Read more to find ou!

 

1. “I can’t save until my debt is paid off”

Paying down your debt is an important financial priority, particularly if it’s accruing interest. However, research shows that keeping some money on hand for unexpected expenses improves long-term financial security – even if you are paying off high-interest credit cards. Setting aside as little as $400 can help prevent you from going into further debt when unexpected expenses arise.

 

2. “I can’t afford to save for an emergency”

If you feel like you’re living paycheck to paycheck, you’re not alone. But saving even a small amount can make a difference. If you save $50 per paycheck (just $25 a week), you will have $400 saved in 4 months. If $50 feels like too much, start with a smaller amount. The key is to start saving now - you’ll be surprised at how much it adds up over time.

 

3. “I need to save 3-6 months expenses”

Financial experts often recommend setting aside 3-6 months of expenses. This recommendation is based on the average amount of time it takes to find a new position if you lose your job. But this goal can be overwhelming if you are paying off high-interest debt or living paycheck to paycheck.

If you’re among the nearly 40% of American households who can’t cover a $400 emergency expense without borrowing money or selling something, start there. Once you have saved $400, aim for $1,000. You can also set personally meaningful targets, like one month’s rent or mortgage payment.

 

4. “I should only use my savings for serious emergencies”

A car accident is clearly an emergency. What about a flat tire? Or a speeding ticket?

All three are unexpected situations that require you to pay money to keep driving your car. If your choices are between using your emergency savings or borrowing money, dipping into your savings will cost you less. Just remember to replenish your fund when you can – and drive a little more carefully.

Having an emergency fund that you don’t use because your threshold for “emergency” is too high can cost you more in the long run. This is why we prefer the phrase “rainy day fund.”

 

5. “Rainy days are always bad”

Your beloved friend's wedding might be a shock to your budget, but a happy one. Imagine how good it would feel to know that you can send a thoughtful gift, or travel to the event, without having to take on debt.

As you prepare to save for a rainy day, consider not just disasters but all the surprises that life will bring you. You can think of your savings as a shelter from the storm, or you can dance in the rain.

 

Don’t be caught off guard by these common unexpected expenses. Be ready with these tips.

Related content

How to prepare for healthcare costs in retirement

The connection between your health and financial well-being

Is a Health Savings Account missing from your retirement plan?

How to build and maintain a solid credit history and score

How to decide when to shop local and when to shop online

Retirement expectations quiz

What financial advice would you give your younger self?

Starting your homebuying journey: Tips from a U.S. Bank Goals Coach

Working with an accountability partner can help you reach your goals

Growing your savings by going on a ‘money hunt’

How to use credit cards wisely for a vacation budget

Travel for less: Smart (not cheap) ways to spend less on your next trip

Multiple accounts can make it easier to follow a monthly budget

Evaluating interest rate risk creating risk management strategy

You can take these 18 budgeting tips straight to the bank

Certificates of deposit: How they work to grow your money

9 simple ways to save

Are savings bonds still a thing?

How I did it: Learned to budget as a single mom

What’s your financial IQ? Game-night edition

Understanding the true cost of borrowing: What is amortization, and why does it matter?

5 financial goals for the new year

Which is better: Combining bank accounts before marriage — or after?

Does your savings plan match your lifestyle?

Do you and your fiancé have compatible financial goals?

Checking and savings smarts: Make your accounts work harder for you

Should rising interest rates change your financial priorities?

Saving vs. investing: What's the difference?

How to cut mindless spending: real tips from real people

Your 4-step guide to financial planning

How to use debt to build wealth

How to manage your money: 6 steps to take

Good debt vs. bad debt: Know the difference

6 common money mistakes to avoid

Avoid these 6 common mistakes investors make

Key components of a financial plan

Webinar: 5 myths about emergency funds

How compound interest works

5 things to consider when deciding to take an unplanned trip

5 myths about emergency funds

A who’s who at your local bank

Allowance basics for parents and kids

Finding a side gig to fund your goals

Helpful tips for safe and smart charitable giving

Tips for working in the gig economy

5 tips for parents opening a bank account for kids

6 pandemic money habits keep for long term

How having savings gives you peace of mind

How to best handle unexpected expenses

How to manage money in the military: A veteran weighs in

How to save for a wedding

It's possible: 7 tips for breaking the spending cycle

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

Webinar: Uncover the cost: International trip

What military service taught me about money management

Building a financial legacy for your family and community

First-timer’s guide to savings account alternatives

How to increase your savings

Money Moments: 8 dos and don’ts for saving money in your 30s

Myths vs. facts about savings account interest rates

Things to know about the Servicemembers Civil Relief Act

Bank from home with these digital features

5 tips to use your credit card wisely and steer clear of debt

Practical money tips we've learned from our dads

What’s in your emergency fund?

Tips to raise financially healthy kids at every age

Money management guide to financial independence

5 ways to spring clean your finances and save money year-round

Saving for a down payment: Where should I keep my money?

Beyond the mortgage: Other costs for homeowners

How to Adult: 5 ways to track your spending

3 steps to prepare for a medical emergency

College budgeting: When to save and splurge

How to save money in college: easy ways to spend less

Checklist: How to gain financial independence from your parents

How to talk to your lender about debt

Everything you need to know about consolidating debts

7 steps to keep your personal and business finances separate

Know your debt-to-income ratio

How to use your unexpected windfall to reach financial goals

U.S. Bank asks: What do you know about credit?

How to improve your credit score

Dear Money Mentor: How do I pick a savings or checking account?

5 tips to use your credit card wisely and steer clear of debt

Luxembourg's thriving private debt market

Webinar: Mindset Matters: How to practice mindful spending

Programme debt Q&A: U.S. issuers entering the European market

Top 3 considerations when selecting an IPA partner

How to maximise your infrastructure finance project

Consolidating debts: Pros and cons to keep in mind

Webinar: Smart habits and behaviors to achieve financial wellness

What I learned from my mom about money

How to choose the right business savings account

Does your side business need a separate bank account?

Maximizing your infrastructure finance project with a full suite trustee and agent

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.