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How Important Is It to Have a Rainy Day Fund?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

rainy day fund
Be prepared for the unexpected with a rainy day fund.

Life is unpredictable, which is why a rainy day fund is one of the most important components of a sound financial foundation. Even the most prepared, organized people can be caught off guard and put into a difficult financial situation when the unexpected arises. Because of this, it’s essential to have money tucked away in an emergency fund and a rainy day fund. While most people would agree that having easy-to-access cash is important, 29% of households have less than $1,000 in savings, according to a recent MagnifyMoney study.

In this post, we’ll explain exactly what a rainy day fund is, how much you should save and how to start one today.

What is a rainy day fund?

Rainy day fundEmergency fund
Money set aside for predictable expenses, like a roof repair or trip to the mechanic. Money set aside for unpredictable, and unplanned for expenses such as job loss, divorce or a sudden change in income.

Often, the terms rainy day fund and emergency fund are used interchangeably. While they are both savings accounts that can be used to pay for the unexpected, they differ in a few key areas. It’s important to learn the difference between the two types of savings accounts and contribute to both.

A rainy day fund is a designated amount of money that has been set aside for one-off expenses that you can typically predict the need to pay for at some point. Rainy day funds should be easily accessible and used to cover expenses that fall outside of your normal budget. This fund can be used to pay for things like car or house repairs, broken appliances, additional taxes, children’s field-trip fees, or last-minute travel expenses. While these expenses are usually not part of your monthly budget, you could likely anticipate the need to pay for them once or twice a year. So, a rainy day fund comes in handy.

“The number one reason to have a rainy day fund is peace of mind,” said Corbin T. Green a financial advisor in Salt Lake City. “People are able to go to bed knowing that if something were to happen, there are funds available to take care of that.”

This fund allows you to pay for smaller, one-off expenses without going into debt or pulling from your checking account and throwing off your well-planned budget that is used to pay for predictable monthly bills and expenses.

An emergency fund is exactly what it sounds like—a reserve of money or savings account that you can quickly access in case of an unexpected and unplanned life emergency. Typically, emergency funds are used to pay for unexpected, longer-term events such as medical bills, job loss or divorce.

“If something were to happen where you got laid off, left a job or got injured, having an emergency fund protects you and buys some time,” Green said.

Experts suggest having three to six months’ worth of money in this account that you could easily access and use to run your household and pay your monthly bills in the case of an emergency.

How to save for your rainy day fund

rainy day fund side gig
Consider taking on a side gig to bring in extra cash for your rainy day fund.

It can seem daunting to put extra money away each month, but saving money is a key part of smart financial planning. We know it’s important to save for your rainy day fund, but how do you get started? Here are some easy ways to save more money each month:

  • Create multiple savings accounts: Instead of lumping all your money into one savings account, create multiple savings accounts to help you distinguish between the emergency fund and the rainy day fund. If you ever need to access either of these accounts, you’ll know which one to pull from.
  • Automate your savings: It’s easy to say you’ll put extra money into your savings account at the end of each month once bills are paid. But, if you don’t pay yourself first, at the end of the month, you likely won’t have saved what you originally intended. By automating your savings, you’ll automatically have money set aside each month and won’t have to worry about it. Treat your savings as a bill and pay it automatically, on time, each month.
  • Reduce your spending: Money saved is money earned. If you’re looking to save for a rainy day fund, try trimming your spending and adding a little more each week or month to your fund. Cut back on eating out or your daily coffee run and put that money towards your fund.
  • Take on a side hustle: Many millennials are taking on additional work or side hustles as a way to earn more money. If your full-time salary isn’t cutting it, consider taking on a side hustle as a way to quickly boost up your rainy day fund.

Where to keep your rainy day fund

rainy day fund
The best place to stash your rainy day fund is in a savings account, where you can easily access the money in a time of need.

Now that you’ve built up some money for your rainy day fund, where should you keep that money? You want to find a safe place to store your money that gives you easy access to the funds in a pinch but can also allow you to earn interest on your funds.

The best options

Saving accounts: A savings account is a no-brainer when you’re looking for a place to stash your rainy day fund. Savings accounts are FDIC insured and offer better interest rates than checking accounts. Check out the best savings accounts here.

Money markets: Money markets are a type of account that usually offer higher interest rates than checking or savings accounts. You can access more money relatively easy, but money market accounts may limit the number of withdrawals each month. Also, most money market accounts require a minimum balance to be met.

Avoid these options

Checking accounts. Checking accounts probably aren’t the best option for your rainy day fund. They give you quick, easy access to your money, but often offer low, if any, interest. You may also be more tempted to spend the cash if it’s readily accessible in your checking account and you’ve got a linked debit card you can use.

CDs. CDs often charge early withdrawal penalties when you try to cash them out before your term is up. Since emergencies are unpredictable, avoid locking your rainy day fund up in a CD. Stick to accounts that offer easy access like a savings account.

What to spend your rainy day fund on

rainy day fund
A home repair or unexpected medical bill are two examples of a good time to dip into your rainy day fund.

Rainy day funds are usually not used to cover ongoing, long-term, emergency events. “If it’s a true emergency, it’s usually not a materialistic expense,” said Green.

Rainy day funds can be spent on things like car repairs, new tires, and emissions and inspections. Or perhaps you need a new washing machine, fridge, roof or floor? Rainy day funds are meant for such expenses. Most people wouldn’t budget for a new roof because it’s a one-off expense. However, it’s somewhat predictable that you’ll have to repair your car or home at some point, so this type of fund is the perfect financial resource for occasions like this.

However, if you lose your job, become sick or are unable to work for a sustained period of time, you would not use your rainy day fund, but instead, pull from your emergency fund.

“Use your emergency fund when something impacts your ability to earn a paycheck or you lose your income and need to use it [emergency fund] to pay your bills and live off of it,” Green said.

Why a rainy day fund is important

rainy day fund

Change is the only predictable thing in life. It’s almost inevitable that something unplanned will occur requiring additional money to pay for it. Knowing this, it’s smart to plan ahead and prepare for the unexpected. Having a rainy day fund is important because it gives you peace of mind and financial protection in case something happens. This type of fund is extra padding in your budget that can keep you out of debt and on track financially, no matter what unexpected life event unfolds.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sage Evans
Sage Evans |

Sage Evans is a writer at MagnifyMoney. You can email Sage here


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How to Get a Debit Card

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Debit cards are a must-have for many consumers today. They’re more widely accepted than checks, safer than carrying around large sums of cash and, unlike credit cards, don’t land you in debt (unless you overdraft).

Luckily, getting a debit card with a checking account, prepaid debit card or even a savings account can be simple. This step-by-step guide on how to get a debit card covers the different types of accounts and how you can get one.

Decide what kind of account you need

There are many ways to get a debit card. The best option for you will depend on your financial situation and goals.

  • Checking account: This is a good way to safely store money you plan to use in the near future. A checking account from a bank almost always comes with one of these cards that gives you easy access to those funds. Some banks offer a bonus for opening a checking account, and there are also ones that earn rewards. If you’re after bonuses and rewards, keep in mind that these accounts often come with higher fees. Your local credit union is also a great option for a checking account — and debit card — with minimal fees. Plus, it’s smart to build a relationship with a credit union as you might want to use it for other financial needs in the future, such as a low-interest credit card, personal loan or mortgage.
  • Savings account: Some savings accounts and money market accounts will give you a debit or ATM card that allows you to make purchases and withdrawals using your savings. However, this option isn’t ideal for most people since Federal Reserve Regulation D limits savings accounts to six transactions per month. Exceeding that limit could result in fees or your account being closed.
  • Online bank account: Online banks operate without brick-and-mortar locations. Because they have fewer overhead costs, high-yield online checking accounts often have higher APYs and lower fees than traditional banks.
  • Prepaid debit card: It is possible for a financial institution to reject you for a checking account, usually because you have outstanding debt or banking fees from a prior account. Prepaid debit cards don’t require a bank account, and you can load money directly on the card with cash.
  • Debit card for teens: If you’re looking to get a debit card for your teen, look into debit cards and checking accounts specifically geared toward teens and students, which tend to come with lower fees and may not allow overdrafts.

Step-by-step guide on how to get a debit card

Now that you know what you want, follow these steps to open an account and get a debit card.

  • Research account features: Read up on account fees and features so you can choose the best one for you. Look for low-fee or fee-free checking accounts with low minimum balance requirements. Also seek out convenient features, such as mobile banking and online bill pay.
  • Gather necessary documents: If you’re opening a bank account, you’ll likely need to provide two forms of identification. These can include a passport, driver’s license, state identification card, birth certificate or Social Security card. Some banks will allow you to provide one form of identification and a bill addressed to you.
  • Bring funds to deposit: Most banks will require a minimum opening deposit to open an account, which tends to range from $25 to $100. This money goes into your account, and you can use it immediately.
  • Open an account: You’ll need to go to the bank or credit union to open an account in most cases. However, online checking accounts may allow you to open one through the bank’s website.
  • Request a debit card and load it with funds: Some accounts automatically come with a card, while others will require that you request it. You’ll also want to fund your account, which can usually be done with cash or check, or through another bank account.
  • Activate your debit card: Once you receive your card, you’ll be asked to activate it and set a PIN so that it can be used at an ATM. Make sure to do this immediately. After that, your card is ready to use.

How to get a prepaid debit card

Unlike a regular debit card, a prepaid debit card isn’t linked to a bank account. It’s useful for people who have difficulty getting approved for a bank account. They usually can’t be overdrawn, making them a good option if you’re prone to this.

You can purchase and reload prepaid debit cards at many grocery stores, convenience stores and drugstores using cash or check — and sometimes direct deposit. Many come with activation, monthly, ATM and deposit fees, but the best prepaid debit cards minimize those. You can even find a few prepaid debit cards that offer rewards.

Things to remember when you have a debit card

While these cards are secure and convenient, they can also rack up fees if you aren’t careful. Pay close attention to ATM fees, which can be charged by both your card issuer and the ATM owner. Most debit cards come with a network of ATMs you can use fee-free, so stick to those. Overdraft fees can also add up quickly if you don’t pay attention to your balance. To avoid these altogether, ask your bank to set up your account so that transactions that would overdraw your account are denied.

Fraud is always a threat with debit cards, from data breaches at places you’ve shopped to ATM skimmers, who use hidden devices to skim your card information from an ATM you’ve used. With credit cards, you’re only liable for up to $50 of fraudulent charges, but with debit cards you can be held liable for $500 or more.

Keep your card information safe by visiting easily visible ATMs in high traffic areas and always covering your hand while you enter your PIN. Keep your account information and PIN private, and avoid disclosing it over the phone or through email. If you shop online, don’t make purchases while connected to public Wi-Fi.

What is a rewards debit card?

Rewards debit cards offer points or cash back in exchange for every dollar you spend. The cashback cards typically deposit your earnings directly in your account, while the points-earning cards offer points that can be exchanged for travel, merchandise and more. These types of debit cards can be tempting, but they often come with annual or monthly fees that can outweigh the rewards you earn.

As with anything, the key to getting a debit card successfully is doing your research beforehand and selecting the best option for your needs. Once you’ve done that, you’ll be on your way to faster, more secure payments in no time.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elizabeth Aldrich
Elizabeth Aldrich |

Elizabeth Aldrich is a writer at MagnifyMoney. You can email Elizabeth here


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What Does the Dodd-Frank Rollback Mean for You?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

It’s been a year since Congress adjusted parts of the Dodd-Frank Act financial reform package, which was originally implemented in 2010 to address the financial industry excesses that helped cause the financial crisis of 2008.

The Dodd-Frank rollback was a bipartisan effort designed to make life easier for smaller banks, and also extend certain consumer protections. However, the effort drew negative attention from those who argued that dialing back some bank oversight could possibly contribute to another financial crisis.

So what happened with the Dodd-Frank rollback, anyway? In this article, we’ve rounded up what parts of Dodd-Frank changed, what stayed the same and what it all means for your banking and personal finances.

Why was the Dodd-Frank reform enacted in the first place?

The Obama administration proposed the Dodd-Frank reform bill in response to the financial crash of 2008, which set off the worst economic downturn since the Great Recession. Congress passed the bill in 2010.

The Dodd-Frank Act spans 2,300 pages and directs federal regulators to enforce more than 400 new rules and mandates. According to David Reiling, CEO of Sunrise Banks, “It imposed particular attention on the mortgage lending industry which was considered the main trigger for the Great Recession of 2008.”

Some of the rules under Dodd-Frank include:

  • New disclosure requirements for mortgage loans, so consumers could better understand what they are applying for.
  • More oversight over banks to make sure they have enough cash reserves.
  • The launch of new regulatory agencies for the banking, credit rating and insurance sectors.
  • The creation of the Consumer Financial Protection Bureau, a new government agency focused on helping consumers with money issues.

For more on the specifics of the original Dodd-Frank bill, check out part one of this series here.

What changed with the Dodd-Frank rollback?

Under the original terms of Dodd-Frank, banks faced greater regulation and oversight from the Federal Reserve when they held $50 billion or more in assets. Supporters of the Dodd-Frank rollback thought that this threshold was too low and created an excessive regulatory burden for smaller regional and community banks that don’t have the same resources as the big banks.

After the rollback, the cutoff for mandatory extra regulation was pushed up to $250 billion in assets. In addition, regulators were given the discretion to require stress tests and extra regulations for banks with between $100 to $250 billion in assets, provided the regulators think it’s appropriate.

Brandon Renfro, assistant professor of finance at East Texas Baptist University, is supportive of the rollback overall. “Bigger players are better able to handle the regulations, due to economies of scale, while the Dodd-Frank rollback will give smaller organizations slack and flexibility to operate.”

How could the Dodd-Frank rollback impact your banking?

The Dodd-Frank rollback set to reduce regulations and improve profits for smaller banks. Since these banks no longer need to go through the same strict compliance rules and stress testing, they should be able to earn more. Supporters of the rollback believed that small banks could pass these savings on to consumers, by paying higher interest rates on products like CDs and charging less for loans.

The Dodd-Frank rollback also loosened the requirements small banks face for setting up a mortgage loan. Small banks no longer need to follow the Dodd-Frank data reporting requirement meant to help detect predatory and discriminatory lending. This makes it slightly easier for these small banks to offer mortgages.

Finally, the rollback added a new protection for small lenders offering mortgages (those with less than $10 billion in assets). “One of the changes of the rollback was to allow certain small creditors additional safe harbors when determining a consumer’s ability to repay a mortgage loan,” said Reiling. “By providing additional protection to these institutions who have historically always verified a consumer’s repayment ability, this may translate to easier access to credit for consumers seeking loans at these institutions.”

Overall, the intent of the Dodd-Frank rollback is to make it easier for small banks to operate with the goal that this will improve banking and borrowing for consumers. However, this is just an inclination as there are no specific rules in the bill requiring these banks to offer better rates for their customers.

Free credit freezes, extended credit fraud protections

Beyond changes for banking, the Dodd-Frank rollback also created new benefits for consumer credit reports. First, consumers can now request a free credit report freeze from the credit bureaus — Equifax, Experian and TransUnion. A credit freeze locks up your report so new loans and lines of credit can’t be opened under your name — a good safeguard if you’re worried someone stole your identity.

Before the rollback, you had to pay up to $10 per credit bureau to get this protection in place. Now, this service is free for any credit user who wants it.

The Dodd-Frank rollback also extended the length of a short-term fraud alert on your credit report. It’s now one year, up from 90 days. When your report has a fraud alert, the bureaus must take extra steps to verify your identity before issuing new credit, like by calling you first.

It’s not as strict as a credit freeze so you can still set up accounts yourself, but adds extra protection against identity theft. Before the rollback, you would need to reapply for a new short-term fraud alert every 90 days, but now it lasts a full year.

Could the Dodd-Frank rollback fuel a financial crisis?

It took years for the country to recover from the last financial crisis and it’s understandable to be concerned about any legislation that might make another one more likely. While the Dodd-Frank rollback does loosen some of the measure’s original rules, it retains the majority of the original protections: the new regulatory agencies, the Federal oversight of large banks, the new disclosures for mortgages, among many others.

“Could the rollback increase the chances of a financial crisis? Yes, but only by some marginal degree,” said Renfro. “The key thing of the rollback is that it limits the regulations on the small banks, who were not key contributors to the financial crisis. The large banks are still constrained by the rules of Dodd-Frank so I’m not too concerned about the change.”

The final word on the Dodd-Frank rollback

Passing new legislation is always a balancing act, and the government decided that the extra potential growth and consumer benefits justified removing some of the Dodd-Frank’s rules. The main framework of the measure’s protections remains in place, while small banks and community banks get some regulatory relief. That seems like a fair trade-off, but only time will tell whether this is the right move.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

David Rodeck
David Rodeck |

David Rodeck is a writer at MagnifyMoney. You can email David here