Building a Rainy Day Fund is the Simple Trick to Survive Unemployment

by Vincent King · 10 comments

Imagine waking up one morning, slapped in the face because you no longer have a job. Living paycheck-to-paycheck used to haunt you, now it’s a dream come true compared to the life that lies ahead.

Over the last few years, this stark reality has crashed head first into a shocking number of Americans, just like you and me. When it happened to my family, we were slapped on the back of the head, caught off guard – cold water poured over the top of our reality.

One day we were struggling to pay our bills, the next, we were struggling to live.

”Struggling to pay our bills,” meant struggling to pay our bills and live life without a share of fun. With kids, you can’t exactly lock yourself away from the world without spending a dime on entertainment. Not unless you want mutiny. So we always made sure to save a little extra money each month for family outings and miscellaneous fun.

Save and spend, save and spend, save and spend. That was our pattern, and where we went wrong.

Don’t make the same mistake we made.

Saving for That Rainy Day


I know what “saving for a rainy day” actually means. For years, I thought it meant saving for when you wanted to go out and have fun.

Nope. Not unless you really want to hurt when it’s pouring.

“Rainy day” clearly means the hard times that might lie ahead. But I was naive. Saving for a rainy day means easing the burdens that rain from the unexpected; losing your job, an unexpected health crisis, or any other significant threat to your livelihood.

Forcing yourself to save for a rainy day will make sure you’ll always be dryer when the sky opens up and starts pouring. While there’s no definitive answer to how much you should have in reserves, it’s safe to start with half of a year’s salary.

When and How To Start Saving

Start today. Waiting too late can carry terrible consequences.

When you start saving, make a separate account, like a high yield savings account, specifically for that money. Never combine it with regular savings accounts that you rarely contribute to. Name this account in a way that distinguishes it from everything else. A name is a constant reminder that this account is essential to your family’s financial health.

Once you set up and name your account, then start getting it to grow.

How much you pad your account to hit six months worth of salary is up to you. The more you put away, the faster your safety net will spread.

If you must ration your money like most of us, try putting away as much as you can, shooting for a fourth of your total earnings. Don’t worry – this is a temporary saving plan until you can get your account cushioned – you won’t have to live off peanut butter and crackers for long.

Don’t Give Up

Living on three fourths of your salary will be hard, but think of what you’re gaining in the meantime – six months worth of sanity. Six months worth of minimized stress.

The sacrifices that you make now can really help you adjust to making more difficult sacrifices later. Think of it as training for disaster.

The Plan

Figure out what you can live without, then cut it from your budget. If you think you can’t live without TV, try it anyway. You’ll find yourself spending more time with your family and friends, and doing things like reading more. You can even utilize that HDMI port on your laptop – you know, the reason you justified buying it in the first place – to watch online programs on your TV. There are so many ways to cut your cable TV bill, and it’s easy to take them for granted.

Look at your snack cabinet. What can you cut? Our family discovered that we spent about $100 a month on snacks and nibbles that we didn’t even need. A hundred dollars a month doesn’t sound like a lot, but when you’re living on nothing, it seems like everything.

Make a game of saving before it has to be real.

This sort of exercise will be great for your disaster fund, and amazing for your family, too. It will train them to function on the bare necessities so if this ever happens, they’ll be ready and your household will be less stressed.

You may even find that once you’ve built your fund, you may not want to return to the life of excess you were living before. And that you enjoy knowing you have the money to cover the essentials your family will need in case something goes horribly wrong.

If you prepare today, you can make the hard times a whole lot easier. What other tips do you have?

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{ read the comments below or add one }

  • Wendy says:

    My dad was a firm believer in cheap entertainment. And we didn’t even have a TV, as my parents thought it was bad for kids (imagine!). We rode bikes, we went swimming in the local pond, we played board games like crazy, read books (again and again, when we didn’t live very near a library), and had after school jobs for spending money from 9 or 10 years of age (delivering papers, babysitting, mowing lawns, etc etc etc. I know, kinda dates me, doesn’t it).

    When we travelled, we camped. And not at camping grounds, either (one advantage to living in the west U.S.) Sometimes with tents (when I was little), then without, as I got older. Once a week, we’d stay at a hotel and have a proper shower/hair wash. Otherwise, it was scrubbing with a wash cloth and washing hair in public bathroom sinks. At least once I remember going to a public swimming pool to get proper showers – much cheaper than a hotel. And museums, free ones. Getting pulled on old wooden skies (the kind where you shoved your sneaker or boot into a leather loop on the ski) behind the car along dirt roads, inner tubing down any hill we could find, inner tubing in rivers or lakes. Canoeing, and even more, hiking, anything that would keep the whole family entertained on $10 or less per day (ok, that REALLY dates me!)

  • wendy says:

    You’re so right! A rainy day fund offers security when it’s most needed. Once your saving begin to grow, you’ll be encouraged to find even more ways to save because you’ll be so encouraged by your own restraint and the resulting success. Living on less than you think you need often provides you with a life less cluttered and improved clarity of your life goals. More stuff is simply more stuff. More savings is more security.

  • Shane says:

    I have always tried to live on the rule of fourths, one to rent, one to bills, one to entertainment and food, and one to savings. IT can be hard at times, but as you said peace of mind is worth it.

  • bmv818 says:

    Any advice on allocating one’s rainy day fund savings vs. retirement savings? Not to mention goal specific savings (e.g., home down payment). Obviously greatly influenced by individual factors. My employer doesn’t match so that standard tipping point doesn’t work for me.

  • James says:

    In our household, I’m sort of the spender and my wife, being more frugal than I am, is in charge of saving for our family for the rainy day.. 😉

  • ginger says:

    Another option to a rainy day fund, is to have multiple streams of income. If both spouses work, live on one income and save the rest. You will build a rainy day fund quickly, but it will take a lot of rain to need to use it. Or, buy a rental property or build of dividend fund portfolio, or even get a side hussle.

  • Lulu says:

    I agree with you on this point. I had an emergency fund that allowed me to live for one whole year while I was out of work!!!! I am slowly going to rebuild it now that things have changed.

    • Steve says:

      LULU- Good for you for having the discipline to leave your emergency fund untouched. All too many people think because they have the money they can spend it- it takes some serious self discipline to make sure you leave that money untouched for times when you will need it. KUDOS to you!

  • Drew says:

    Good advice here. Our agricultural ancestors understood the value of savings all too well, though not just for a rainy day in their case. With no welfare to fall back on, the penalty for not saving a portion of your annual harvest as stock seed, to keep until planting again after the winter was quite literally, death! So I’m sure we can make a few sacrifices in order to survive a possible bought of unemployment.

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