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How much do you need?
The ideal amount to have in a rainy day fund depends on your personal circumstances. Some experts suggest you should have enough to cover 3 to 6 months' worth of living expenses. That may sound like a lot of money but even starting with a modest amount of savings then gradually building them up will help.
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How do you get started?
You can start saving for emergencies by tracking your income and spending for a month. This will reveal exactly where your money is going. Separate the things you need to spend on – the ‘needs’ such as energy bills, health expenses and food – from the ‘wants’ like entertainment, fashion and eating out. Are there any cutbacks you can make?
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You need a budget
Next, create a budget to make sure you spend on those things you really need. In your budget, set aside some of your income for savings. You may want to save a percentage of your income each week or month. Start small and add to your savings regularly over time.
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Time to negotiate
Take some time to take a good look at your bills and regular expenses. Things like your mobile phone, insurance, and energy bills. Call your providers and see if you can nab a better rate or switch to more affordable options when it’s time to renew. Any money you save can be put into your rainy day fund.
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Try a saving challenge
If you’re finding saving tough, try a saving challenge. Over a month, for example, you could gradually increase your savings by a small amount each day, week.
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Don't forget to save
Automating your saving helps make sure that you don’t forget to save. Keep your rainy day fund in a separate account from your regular current account and set up a standing order to save into your rainy day saving account. Research different saving account options, keeping an eye out for accounts with competitive interest rates.
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Use your rainy day fund when you need to
It's fine to tap into your rainy day savings to avoid going into debt. After all, that’s what a rainy day fund is for. The key is to start building up your savings again as soon as you can, so that you can survive the next shock to your finances.
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Last word
We all get hit by sudden, unexpected expenses, from time to time. But, if you’ve saved for a rainy day, you can make sure that a drama doesn’t turn into a crisis. Start saving even if you can only put away a little today, increase how much you save when you can, and save regularly over time.
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Celebrate your successes
Stay focused on your goals, maintain a positive mindset, and believe in your ability to overcome any obstacles along the way. Remember to celebrate every step forward, no matter how small – you’ve earned it.
