People often use the terms “rainy day fund” and “emergency savings” interchangeably when they are really two completely different forms of personal finance insurance. A rainy day fund is meant to help you weather short-term, relatively low-impact financial storms of less than $2000 such as a major car repair. On the other hand, an emergency savings account with three to six months of living expenses is designed for longer-term crises such as a job loss or medical issues.
The bottom line: Keeping dual emergency funds provides a rock solid hedge against the unexpected to help ensure you stay in control of your life.
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