ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A rainy day fund is a fixed amount of money set aside in case of unexpected expenditures, heightened living expenses, economic downturns and more. Rainy day funds are different than emergency funds, which typically contain more money.

Detailed explanation-2: -While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses.

Detailed explanation-3: -An emergency fund is a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.

Detailed explanation-4: -A rainy-day fund is smaller than an emergency fund and is often used for one-time small, unexpected expenses. A rainy-day fund should generally have $500-$1000 to ensure you have enough cash on hand to cover things such as car repairs, new appliances, etc. without affecting your monthly budget.