Saving for something big is always an exciting process, with your dream set firmly in your sights you work hard and watch as your savings grow into something amazing.
Budgeting for the things you want will be a very familiar process for most people, but saving for life’s necessities in case of an unexpected hiccup down the line can commonly be overlooked.
Granted, if you’re used to saving for say a great new car or a fantastic holiday, then saving for an emergency ‘rainy day’ fund might comparatively seem a little dull.
Unfortunately though life can be unpredictable and if you do find yourself in a sticky spot, having an emergency honeypot to fall back on will really help you out.
Why are emergency savings so important?
Emergency savings can keep you afloat in a crisis, this could vary from your fridge, laptop and car breaking down in the same week all the way to you losing your job.
Whatever the circumstances you’ll need to have the funds readily available to cover your day to day living whilst you deal with the situation. The money is there to cover everything from food, utilities, fuel etc. down to things like mortgage payments.
Being financially covered for a few months will not only stop you from potentially having to take out a high interest, short term loan, but it could also ideally give you enough time to plan your next move.
How to begin saving
The amount of savings that you’ll need will depend entirely on your lifestyle and your usual spending habits.
A great place to begin would be to track your spending using a personal finance tool that can give you an approximate idea of how much you spend over a two/three month period, and in what areas. From here it can be very easy to set yourself an accurate goal for your emergency funds to ensure that you’ll have enough to support yourself for a few months.
Once you have a set figure in mind you simply need to set up a high interest account which you transfer money into on a weekly/monthly basis and forget about it.
Don’t touch it or move it around and your savings will begin to mount up in no time at all. You could even transfer as little as $25 a week and given a year you will have saved around $1300 without really noticing.
Furthermore, once you’ve met your ‘rainy day’ goal you can easily continue with your weekly/monthly standing order, but instead transfer it into the ‘new car’ or ‘holiday’ fund.
Once you’re safe in the knowledge that all necessities can be covered in a crisis you can get back to saving for the fun stuff!
Do you have a rainy day fund? How have you set it up?