Many Americans face financial pressure at year-end due to holiday spending and rising everyday expenses. A small rainy day fund can provide breathing room when unexpected costs arise, helping avoid dependence on credit cards. Building a rainy day buffer helps cover minor emergencies like car repairs or doctor visits, ensuring financial stability.

A Federal Reserve report found 37% of Americans can’t cover a $400 emergency with cash, while LendingClub reported over 60% live paycheck to paycheck. Rainy day funds are crucial for smaller, short-term emergencies like car repairs or unexpected bills, reducing reliance on credit cards. Emergency funds, on the other hand, are for larger financial crises like job loss or major health issues.

Automating savings contributions can help build a rainy day fund effortlessly. Many banks offer automatic transfer features within online dashboards, allowing consistent saving by setting up transfer schedules. Round-up features move small amounts to savings with each purchase, aiding in consistent savings growth over time.

High-yield savings accounts offer interest rates well above the national average, helping rainy day funds grow faster. Shopping around for the best rates and features ensures maximizing savings. Savings buckets, offered by many online banks, create mini savings categories within a single account for better organization and tracking of savings goals.

Linking a savings account to a checking account at the same bank allows for instant money transfers and easier automation of savings contributions. Some online banks offer higher savings rates and perks for linked accounts. Setting short-term savings goals, reviewing spending patterns, and trying savings challenges can help kickstart a rainy day fund and avoid debt.

A good rainy day buffer typically ranges from $500 to $1,000, while a full emergency fund should cover at least six months of expenses. Starting with a smaller savings goal before building a larger fund can make a meaningful difference in financial well-being. Building a rainy day fund helps reduce financial stress and ensure stability in times of need.

Read more at Yahoo Finance: These 5 banking tools can help you build a ‘rainy day’ fund before year-end