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Automate Your Rainy Day Fund

Automating your savings can buy you peace of mind. By automatically transferring a small portion of your income to a savings account, you’re able to slowly accumulate a financial comfort often referred to as a “rainy day fund.” A rainy day fund is an emergency fund of money in a bank account set aside for unplanned expenses.

During grad school, I was hired to work at a store, another way to support myself alongside driving for Uber & completing an unpaid internship. Two weeks after I started, there was a storm, and it caused the store—and area— to flood. My car was totaled from the water damage and I found I had no other means of transportation that would work with my schedule.

I hadn’t even received my first paycheck yet, and I had no savings. The company offered me a sympathy check and, thankfully, my insurance paid off my loan balance—however, that still didn’t come close to covering a down payment for another car. I needed a literal rainy day fund that I just didn’t have at the time.

Why Do I Need a Rainy Day Fund?

Discriminatory systematic policies and practices have prevented Black women from experiencing equitable access to financial services. According to a study done by Goldman Sach’s, Black women’s wealth is not only deterred by lower access to high-return assets, but also by increased exposure to high-cost liabilities. Overall, “personal finances make Black women more vulnerable to negative income or spending shocks which can lead to borrowing on unfavorable terms.”

Due to the financial obstacles Black women face, they are five times more likely than white men to use expensive payday loans. These types of loans typically boast interest rates of over 400 percent. Without a financial fallback plan, racking up credit card debt, taking out personal loans, or asking to borrow money may be your only options in the event of an emergency. Instead, having a rainy day fund can help support you through unexpected setbacks, including:

  • Unemployment

  • Medical emergencies

  • Emergency home repair

  • Unforeseen auto repair

  • Sudden death or disability in the family

How Much Should I Have in My Rainy Day Fund?

Although your savings goal will differ depending on your economic situation, you should focus on saving up enough to cover your expenses—not replace your entire income. As a general rule of thumb, you should have enough money in your rainy day fund to cover three to six months of expenses. In 2021, only 40% of Black women possessed enough liquid assets to cover three months of expenses. Through increased financial literacy, this percentage can hopefully grow dramatically in the near future.

With that goal in mind, the simplest place to start would be investing your change, and I don’t mean that you should pull out the piggy bank. No hate for piggy bankers—there are just better approaches. Accumulating a large sum with nickels and dimes could take a while, but luckily there are ways to make saving painless.

How to Automate Your Savings Using Apps

Living in the Big Tech Age certainly has some benefits. Automating your savings has never been easier than it is now, and you’ve never had more options at your fingertips to do so. To get started on your journey toward financial peace, try one of these automated savings apps:

  • Digit – saves your money based on an algorithm

  • Acorns – hybrid investing and savings app that allows you to round up your purchases to the nearest dollar and save the difference

  • Qapital – round-up app that allows you to customize your savings plan

  • Chime – automatically transfers your spare change to a savings account

These are just a few of the applications that are currently available to make automating your savings completely stress free.

Apps like Acorns and Digit will save your change from all of your purchases. It adds up! For example, imagine buying your favorite latte before heading to work. If you typically spend, say, $5.52 on your delicious latte, the extra 48 cents will be instantly put to the side for you. If you end up buying a coffee every weekday at the same price, you’ll automatically be saving approximately $125 per year!

Start Small

Without an emergency fund, any minor setback can lead to a mountain of debt. This doesn’t mean you have to stash away $500 immediately, though. Don’t be afraid to start small with your savings. Change round-ups accumulate quickly and can serve as an emergency fund in the future sooner than you think. The important thing is to remain consistent with your contributions. Automate your savings for your peace of mind. You never know when you’ll stumble on a rainy day.

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