Money & Budgeting

People are generally pretty good at saving for specific items or experiences. Say, for example, you want to save enough money for a down-payment on a house. You put certain strategies into action, cut back on certain other expenses and slowly build your way up to that figure you had been aiming for. Sure, it takes time and effort and a few missed dinners at fancy restaurants, but the tangible reward at the end, coupled with the defined amount of money you’re shooting for, make the process one that most people can manage sooner or later. Saving for unspecified events or that looming ‘rainy day’ we all fear, is another thing entirely. While people know they should save for a rainy day, they’re generally far more preoccupied with splashing out and having fun in the sun, so to speak. While it’s not fun to think about, the feeling of security that comes from knowing you have funds in reserve for unplanned events like house or car repairs, illness or that terrifying moment when your computer hard drive gives up the ghost is something that we all should aim for. Your accountant or financial advisor can help you find more individually-catered saving solutions, but here are three tips to get you started and help you get that rainy day fund up, up and away!

Set an Amount

The biggest hurdle for people trying to start a rainy day fund is that they have no idea how much money they should be putting into it or what that money will be used for. Try to agree on a number that you feel comfortable with and aim for that number. Any time you need to withdraw from it (ensuring these are genuine ‘rainy day’ situations) make a renewed effort to bring it back up to that level, and never drop below that number.

Put Extras Right In

We all experience windfalls every now and again–a bigger tax return than usual, a government grant we weren’t expecting, perhaps a Christmas bonus at work. Instead of spending it on something just because it’s extra money, put it into your rainy day savings. It’s technically cream on top of your usual income, so if you save it straight away you’ll hardly notice that it’s gone.

High Interest is Best

Work on the assumption that your rainy day isn’t going to come tomorrow. A high interest savings account is a great choice and could help you build your savings substantially over time.

In consultation with your tax accountants, explore which areas of your finances could withstand a little skimming, and keep that money aside. Put it out of your mind, and be disciplined—don’t dip into it for that new television or sound system–because when that rainy day does come along, you want to be able to reduce the stress of the situation as much as possible.