How to create a rainy day fund for emergency expenses
NEW YORK (WABC) -- For many people, falling into debt or financial trouble can happen with just one bad turn in their lives. It is why financial advisers preach the need for everyone to have a rainy day fund set aside.
That rainy day fund can help tide you over in the event of a sudden job loss or an unexpected large bill, but it can be difficult to figure out how much to save and how best to go about staying on track.
A new survey by Bankrate found that 21 percent of people have more credit card debt than emergency savings. Another 12 percent said they have no credit card debt, but they don't have any savings either.
There is good news. Fifty-eight percent of people said their emergency savings outweighed their credit card debt.
Bankrate says low unemployment, income growth and a renewed focus on savings after the financial crisis have led to this shift.
For your emergency fund, financial experts recommend having three to six months of living expenses saved. Make sure to factor in rent or mortgage, utilities, and car payments.
Consider setting up an automated savings plan that will put a certain percentage of each paycheck right into a savings account.
Shop around for a savings account that offers a higher rate of return, and look for ways to cut down on some of your expenses. Put that extra money into savings instead.
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