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How to Make the Most of Your Rainy Day Fund

By Maxine Betteridge-Moes

Published July 11, 2023 • 3 Min Read

Having a rainy day fund — no matter the size — may provide peace of mind in stressful or uncertain times. If you’ve already set aside savings, or you’re taking steps to ensure you can ride out any future financial surprises, here are some ways to make the most of your rainy day fund.

Emergency funds and rainy day funds

Regardless of how much money you’ve been able to set aside, it’s important to understand the intended uses of an emergency fund versus a rainy day fund.

  • An emergency fund should only be used in urgent situations that are unexpected and that you have no choice but to finance. This might include unexpectedly losing your job, needing to pay for sudden medical expenses or serious property damage.

  • A rainy day fund can cover smaller, less urgent expenses so they don’t hurt your overall monthly budget, for example, helping pay off debts, paying for appliance repairs, education costs, travel, self-care and more.

While you don’t necessarily need to separate these funds into two different accounts, keeping the two fund amounts separate in your mind may help you consider the best reasons, timing and methods for withdrawing the funds.

1. Pay off debt

If you have enough in your rainy day fund to pay off high-interest debt, choosing to pay it off might be worth considering. That’s because paying off a debt saves you interest costs and can free up cash. Then you can put those savings towards rebuilding your fund or redirect it towards other goals.

Click here to learn more about dealing with debt with advice from an RBC expert.

2. Invest in education

A rainy day fund can help you pay costs related to education. While a registered education savings plan (RESP) is a popular savings vehicle for post-secondary education, tapping into your rainy day fund may help pay for unexpected educational costs like apartment deposits or study abroad opportunities. For younger students, a rainy day fund can help parents cover the cost of extracurriculars, lessons, tutoring and sports fees.

3. Make home repairs

Having a rainy day fund may help you get to the to-do list of work around the house. This could be smaller projects like repairing or replacing an appliance or larger home renovations where you must put down a deposit upfront while you figure out other financing.

4. Take a break

You can use this money for a real rainy day — to go someplace sunny and warm — without straining your budget. If you and your loved ones have been dreaming of travelling, your rainy day fund can help finance a much-needed getaway.

5. Take care of yourself

It may be worth using some of your rainy day funds for self-care to nourish your physical and mental well-being. This might cover expenses like seeing a therapist, getting a gym membership, or massage or physiotherapy appointments. Or you may feel better speaking with a financial professional or accountant who can help give you peace of mind about your finances.

It’s possible you’ll feel guilty when you withdraw from your rainy day fund, but it’s important to remember you can start rebuilding the account as soon as possible. It doesn’t matter how much you put aside each month, but consistency in rebuilding a rainy day fund is key.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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