01
What is a Rainy Day fund?
This is the pocket you dip into when disaster strikes – you lose your job, you have a health emergency, your family needs financial help, etc.
02
Pre-requisite
We wont get into debt here, but assuming you only have high quality debt (like a mortgage on a home), you need to have money saved, and first place it goes into in my opinion is into the Rainy Day fund.
03
So how much?
Everyone is different, in my experience you need to have enough to cover 3-6 months of living expenses. This includes money you need for a roof over your head (mortgage/rent), eat (food costs), and insurance premiums (auto, home, life).
04
Where do I keep it?
The whole point here is to have “easy access” to these funds, and not to be subject to market fluctuations. So, I would park these funds in a Checking or Savings account with no minimum balance requirements, and ensure it is CDIC/FDIC insured. It doesn’t matter if its not growing, it better NOT drop in value.
05
So what’s next?
Now, knowing that you can sleep well at night even if disaster strikes, we can get into Investing!