May 29, 2018

The Importance of a Rainy Day Fund




For many of us, a rainy-day fund might seem like a distant dream. When you are living paycheck to paycheck, clearing your bank account every month and struggling to pay debts off, never mind grow savings, the idea of having a little pot of money “just in case” might seem impossible. You may even find that every time you do manage to set a little cash aside, you need it a few weeks later to buy the kids new shoes or replace broken goods. You know that your emergency fund will never grow if you keep breaking into it, but you need to, to give your family a decent quality of life, or even to put food on the table.


But, a rainy-day fund is incredibly important. Setting aside just a small amount each week in a high-interest account can give you enough to start. Set up a direct debit so that you don’t forget.


Things Come Up
Unfortunately, things come up. Cars break down, appliances come to the end of their lifespan, people get sick and find themselves unable to work, unemployment hits or you have to start planning your veteran memorial service. The kids always need something, and life is constantly throwing up barriers that cost money to pull down.


Having a rainy-day fund means that when things come up, you’ve got some spare cash to cover it and you don’t need to worry about getting into debt.


Things Change
You might be managing today. Your financial situation might be stable, but even if no unforeseen events crop up, things change. Your insurance premiums might go up, food and fuel seem to get more expensive all of the time, your landlord could put your rent up, or fluctuating interest rates might affect your mortgage repayments. Things change and suddenly you can find yourself struggling financially. A rainy-day fund, even a small one, gives you time to budget and make cutbacks to improve your situation.


You’ll Become More Disciplined with Money
The main reason we don’t save is thinking we can’t afford it. The truth is that many of us could if we just made some cutbacks, budgeted more carefully and became more disciplined with money. Saving just a little each week will teach you how to do this. You’ll quickly adapt and learn to cope without it.


You Can Plan for The Future
Your rainy-day fund is there to be used when you need it. To make sure you are comfortable and ready for unexpected events. But, you might not need all of it very often. You may have periods when it continues to grow uninterrupted for some time. This gives you a chance to start making plans. Think of where you want to be in 5 years and start saving for it.


You’ll Have Options
One of the worst thing about being in a tight financial situation is feeling like you don’t have options or choices. You have to do what you can afford, and money dictates your life. Having a little extra gives you more options and some freedom.

*This is a collaborative/contributed/partnered, compensated post. The copy, content, images & opinions are not my own.