# Where Can You Start Building Your Emergency Funds?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-25
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Building Your Rainy-Day Fund: Tips for Financial Safety
Meta Description: Discover the best ways to save for a rainy day, from investing in stocks and cryptocurrency to opening an online bank account for easy access in emergencies.
URL: https://financedigest.com/where-can-you-start-building-your-emergency-fundshtml

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When it comes to money matters, you don’t have to be a financial expert to know that you should save for rainy days. Regardless of your economic standing, it’s important to not be complacent about your money and periodically set aside a certain amount for emergencies. Without an emergency fund, factors like unforeseen personal circumstances and a precarious global economy could make a dent in your wallet and paralyze your everyday decision-making.

This is why you should have a designated fund that will serve as your bedrock for abrupt spending. This slice of your net worth should be able to cover various needs such as medical expenses, car maintenance, home repairs, and the repercussions of unemployment. The amount [needed for an emergency fund](https://www.financedigest.com/need-additional-funding-but-not-sure-how-to-go-about-it.html "Need additional funding but not sure how to go about it?") depends on your lifestyle, but a good rule of thumb is to set aside money from your salary, tax refunds, or other sources of income to cover 3-6 months’ worth of living expenses. For those with a paycheck-to-paycheck state of employment, setting aside 1-2% of your take-home pay for emergencies should be sufficient. If you’re just starting to build your rainy-day fund, here are some [tips to help you determine the right options for your financial](https://www.financedigest.com/5-tips-for-financial-fitness-in-2021.html "5 tips for financial fitness in 2021") safety net.

[**Invest in Stocks or Cryptocurrency**](https://www.financedigest.com/7-reasons-why-you-should-invest-in-cryptocurrency.html "7 Reasons why you should invest in Cryptocurrency")

We’ve all heard talk of the volatile stock and [crypto markets](https://www.financedigest.com/binance-plans-to-buy-rival-ftx-in-bailout-as-crypto-market-crumbles.html "Binance plans to buy rival FTX in bailout as crypto market crumbles"), but that shouldn’t discourage you from investing your hard-earned money. Investment vehicles have high growth potential in the long run, leaving you with [passive income](https://www.financedigest.com/5-mistakes-to-avoid-when-creating-passive-income.html "5 Mistakes to Avoid When Creating Passive Income") that you can extract during emergencies. However, high risks always come with high rewards. Before you buy into these kinds of assets, make sure that the amount you are funneling is disposable [income or money](https://www.financedigest.com/how-to-buy-income-producing-real-estate-without-your-own-money-or-credit.html "How to Buy Income-Producing Real Estate Without Your Own Money or Credit") you have no qualms about parting with.

Cryptocurrencies such as Monero [dispel myths](https://www.financedigest.com/proper-pristine-pads-not-pods-tipi-dispels-the-myths-of-build-to-rent.html "PROPER, PRISTINE PADS, NOT PODS- TIPI DISPELS THE MYTHS OF BUILD TO RENT") that crypto heightens vulnerability to personal data breaches. Monero [operates on a decentralized network](https://www.financedigest.com/how-can-network-operators-monetise-television-quickly-and-effectively.html "How can network operators monetise television quickly and effectively?") and allows fast payments anywhere in the world without being bogged down by regulatory fees. Free crypto wallets like [www.xmrwallet.com](https://www.xmrwallet.com/) are safe and allow you to have complete control over your keys and coins, all while ensuring utmost privacy by obfuscating personal information in transactions.

**Open an [Online Bank](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") Account**

Easy access and high liquidity are two of the most important [things to consider](https://www.financedigest.com/4-things-to-consider-before-buying-your-dream-car.html "4 Things To Consider Before Buying Your Dream Car") when starting an emergency fund. Emergencies can happen at any time, so you should make sure that your fund [isn’t tied to your long-term](https://www.financedigest.com/long-term-investing-isnt-easy-heres-how-to-be-successful.html "Long-term investing isn’t easy – here’s how to be successful") savings. Consider [opening a bank](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season") account that you can easily access online and is separate from your primary savings account. Keeping a standalone emergency fund account will eliminate the temptation to dip into your reserves.

Opening a high-yield savings account is also a good [strategy for establishing your emergency fund](https://www.financedigest.com/debt-strategies-for-funding-early-stage-companies.html "Debt Strategies for Funding Early Stage Companies"). Aside from having government [insurance cover](https://www.financedigest.com/japan-insurers-to-maintain-cover-for-lng-vessels-in-russian-waters.html "Japan insurers to maintain cover for LNG vessels in Russian waters"), high-yield accounts also allow you to enjoy the benefits of cashbacks and high interest rates.

**Buy into** [Money Market Funds](https://www.financedigest.com/explainer-why-european-money-market-funds-inflows-are-lagging-behind-the-u-s-torrent.html "Explainer-Why European money market funds inflows are lagging behind the U.S. torrent?")

[Money market funds began in the 1970s as a way](https://www.financedigest.com/best-ways-to-make-money-online.html "Best ways to make money online") for investors to buy securities with higher returns than standard bank accounts. These are open-ended mutual [funds that invest](https://www.financedigest.com/norway-wealth-fund-to-consider-investing-in-unlisted-equities.html "Norway wealth fund to consider investing in unlisted equities") in highly liquid, short-term securities such as US Treasuries and other government securities.

Money market [funds maintain a fixed value per share](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister"), so these are low-risk funds that can be a good starting point for those new to investing. Money market funds also [offer returns that are relatively higher than some bank](https://www.financedigest.com/first-abu-dhabi-bank-could-renew-35-billion-offer-for-stanchart-bloomberg-news.html "First Abu Dhabi Bank could renew billion offer for StanChart -Bloomberg News") accounts, and you can use these as a complementary repository along with your savings account.

**[Save Money](https://www.financedigest.com/money-saving-hacks.html "Money saving hacks") via Certificate of Deposit**

According to the US Securities and Exchange Commission (SEC), a certificate of deposit (CD) acts as a [savings account that is meant to hold a fixed sum of money](https://www.financedigest.com/saving-money-hacks.html "Saving money hacks") within a certain period. Upon redeeming the CD, you’ll receive the original amount along with [interest paid by the issuing bank](https://www.financedigest.com/ecb-raises-interest-rates-again-cuts-bank-subsidies.html "ECB raises interest rates again, cuts bank subsidies"). Thanks to the regulatory protection of banks, buying a CD is [considered to be among the safest options](https://www.financedigest.com/3-options-to-consider-when-you-owe-the-irs-back-taxes.html "3 Options to Consider When You Owe The IRS Back Taxes") for saving money. In the US, CDs issued by federally insured banks have an [insurance cover](https://www.financedigest.com/app-based-insurance-cover-for-millennials-possessions-and-experiences-back-me-up-powered-by-ageas.html "APP-BASED INSURANCE COVER FOR MILLENNIALS’ POSSESSIONS AND EXPERIENCES: ‘BACK ME UP’, POWERED BY AGEAS") of $250,000.

As with any investment, you’ll only reap the returns of CDs on a long-term basis. We’ll never know if [interest rates](https://www.financedigest.com/czech-interest-rates-already-at-high-level-central-bank-governor-says.html "Czech interest rates already at high level, central bank governor says") might increase over the next few years, so it’s best to work out your purchase as early as possible. When strategizing your CD investment, you should keep in mind that there are [banks that issue steep penalties for taking out your money](https://www.financedigest.com/marketmind-banks-are-leaking-money.html "Marketmind: Banks are leaking money") too early. Explore your options for [banks that won’t](https://www.financedigest.com/open-finance-and-smart-ecosystems-wont-wait-for-banks.html "Open Finance and Smart Ecosystems Won’t Wait for Banks") penalize you for early withdrawals.

**[Strategize](https://www.financedigest.com/now-is-the-time-for-finance-leaders-to-take-on-a-more-strategic-and-valuable-role.html "Now is the time for finance leaders to take on a more strategic and valuable role") Your Financial Umbrella**

We can’t predict when turbulent times will hit us, and it’s never too early to prepare for the worst.

When choosing where to [put your rainy-day fund](https://www.financedigest.com/cash-crunch-for-british-funds-puts-regulators-under-pensions-lens.html "Cash crunch for British funds puts regulators under pensions lens"), be sure to make well-informed decisions based on liquidity, accessibility, safety, and potential returns. Remember, your emergency fund serves as a buffer to help you [stay afloat](https://www.financedigest.com/hung-out-to-dry-smes-need-further-support-to-stay-afloat.html "Hung Out to Dry: SMEs need further support to stay afloat") without relying on loans and debt. It’s important to put your hard-earned money in only the most trusted sources so you can keep [living your life](https://www.financedigest.com/how-to-live-an-extraordinary-life.html "How to Live an Extraordinary Life") without monetary worries.

**This is a Contributed Article.**


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