The NPR Planet Money Blog had a recent post about Americans’ “rainy day” funds. The post references research conducted by the Federal Reserve to determine why Americans save and how much they think they should be saving.
At first, I was shocked by the research findings. The research found that on average, Americans think they need only one month of salary in savings for a rainy day. Remember, this is how much they think they should have, not how much they actually have. I wouldn’t be at all shocked to find that most Americans have very little in their savings accounts, but I am shocked to know that they think they need so little.
As a homeowner, I always have a nagging fear in the back of my brain that I could be hit with a major, unexpected repair bill. One month of my salary is far too little for a proper safety net if something like that happens. I have friends who suddenly had to replace their HVAC system at a cost of nearly $10,000. Unfortunately, one month’s salary for me isn’t anywhere near $10,000.
I took a gander at the comments people made on the NPR post to see if I was the only one who found the research so surprising. Interestingly, many of the comments centered around the definition of the term “rainy day fund.” One commenter noted that he has both a rainy day fund and an emergency fund. His emergency fund is for major unexpected expenses or liquidity if he loses his job, while his rainy day fund is just a cushion in case his regular spending ticks up one month. Another commenter said that her rainy day fund is some cash in a jar that is literally used for rainy days, i.e. ordering pizza delivery while she stays dry watching TV or reading a book (she sounds like my kinda gal).
The comments have made me hopeful that many people responding to the Federal Reserve’s study simply misunderstood what the researchers meant when they asked about rainy day funds. Or perhaps more likely, the researchers misunderstood how people think about and classify their savings. After all, how likely is that the Federal Reserve asked about F-You funds?
Does anyone else have a pet name for their emergency savings accounts?