Rainy Day Fund?

Hey I want to start a rainy day fund. I googled it and it‘s supposed to be between 3 - 6 months of my monthly salary. My question is now why shouldn’t it be more?

Thanks!

Hello @janson87 welcome to the forum and thank you for your question!

Yes that’s right in general your rainy day fund should be around 3 - 6 months of your salary. You should keep enough money to be able to finance your essential costs for at least 3 months. It’s 3 - 6 months, as this should be enough time to get back on track again.

But this is also a personal question, if you feel saver and more at ease with more money in your emergency fund, then of course go for it.

But in general it shouldn’t be more, because the problem with liquid assets is that they usually don’t increase in value. Inflation and low-interest rates will make sure that your accessible cash won’t be worth the same over a period of time.

So yes you can save more than 3 - 6 months, but in this case you could also miss the chance to let your money make more money by investing it.

All best, Elisabeth