Emergency fund
An emergency fund or a rainy day fund can be an important part of your savings plan.
Having your own money set aside to cover unexpected expenses can save you money,
because you won’t pay interest, fees, or other costs that come from borrowing the money
you need.How much should you save? Start with $500 as your goal. This is enough to cover a lot of
common emergencies: many car repairs, a plane ticket to care for a sick family member,
or to pay minor medical costs.Once you reach $500, consider reaching for $1,000. This may be enough to cover your
rent if you lose your job, take care of major car repairs, and pay for many household
repairs.What are the benefits of a savings plan?
Your plan builds your own personal safety net one paycheck at a time. As you build savings, you can have peace of mind knowing you have a little set aside for
the unexpected or emergencies. As you watch small amounts add up, you’ll move closer to reaching your goals and
almost always pay less than when you use credit and rent-to-own. And, you’ll save money by avoiding late fees, interest charges, and other costs related to
not covering expenses or borrowing money. And when you avoid borrowing, you don’t
have to commit future income to paying off your debt.Here is an example scenario using different options for taking care of emergency expenses. The
example examines the costs of paying for an unexpected expense with emergency savings, a
credit card, or a payday loan.