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How to Build a Rainy-Day Fund

Put away a month's pay for emergency expenses

What if you're suddenly faced with a major bill for repairing your car? Or you have unexpected medical expenses? The Harris research organization found in a 2010 poll that 27 percent of respondents had no personal savings at all. Bad idea — you don't want to be selling jewelry or tapping friends for loans when you need money in a hurry. So if you're one of these non-saving folks, set up a rainy-day fund now before you get in a real jam. It can be easier than you think, experts say.

See also: Why you need both a rainy-day and emergency fund.

A sun happy face on water droplets - tricks to grow your savings account for a rainy day

Don't let a cash emergency ruin your day; stash money in savings each week. — Photo by Philip Habib/Gallery Stock

  • Save every week, First, advises Gail Cunningham of the National Foundation for Credit Counseling, shop around for the highest interest rate and open an FDIC-insured account that will give you instant access to your savings.

    Then arrange for direct deposit of some of every paycheck or other income, even if only $10 or $25 a week. But shoot for at least 10 percent of each take-home check, with a goal of having a month's income on hand for short-term emergencies.
  • Capture change. Put all your change into an old-fashioned piggy bank every night to add to your special account. If you find yourself with some extra cash, deposit that, too. Above all, don't touch this fund for any purpose but emergencies.
  • Cut spending. Growing the account will be easier if you cut spending, too, however hard that seems. Ditch the credit cards — pay as you go. Brown-bag your lunch. Lower your thermostat. Skip the new shoes. And, very important, try to get everyone in your household to take part in plugging financial leaks.
  • Talk to a certified credit counselor. The counseling foundation has a website and hotline (1-800-388-2227) to help you find one.

Also of interest: Make your retirement savings last. >>

Joan Rattner Heilman writes about good deals and where to find them.

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