By 
Once you start making money, it’s usually a sign that you must also save it. You’ll never know when something unexpected will happen, so you must be prepared. One of the problems most people face when opening a bank savings account is whether to set up an emergency fund or raining day fund. Are they the same? Do you need both? Find out in this article.
What Is a Rainy-Day Fund?
When you start saving for a rainy day, you’re budgeting for an unforeseen circumstance that will cost something. It could be repairing your vehicle, paying rent, or replacing your washing machine. Money put away for these events is known as a rainy day fund.
Although you can’t precisely predict when you’ll need money from your rainy day savings, you’re sure you’ll need it at some point. The event isn’t expected, but the timing of it is.
What Is an Emergency Fund?
An emergency fund is one you save for financial emergencies. It’s not the same as putting money away in case you need car repairs in the future. Instead, it is bank savings account you create and add to in case you lose your job or have a serious sickness. You’re saving for a potential financial disaster that could happen or not.
Do You Need Emergency Funds and a Rainy-Day Fund?
Yes, it is. Everyone should have a rainy day and an emergency fund. Having banking savings account for each fund would make it easier to separate your savings for their intended purpose. You would want to separate the two funds from each other to prevent taking money from one of the funds, leaving you short.
When you separate both funds into separate accounts, you can’t reduce the amount in either one. If you need money to fix a car, you can pull the money directly from your rainy-day funds. However, you can use your emergency funds when you need money for surgery.
