My outlook is sunny – but rainy days could be ahead
When things are going well financially, it is sometimes said “the sun is shining”. So-called “rainy day funds” are built during these sunny times to call on when times get tough. Rainy day funds – or emergency savings as they are sometimes known – might be used to cover day-to-day expenses if an individual loses their job or falls ill and is unable to maintain work hours. It might make the difference between keeping up with mortgage payments, for example, or falling behind and growing debt. Having money set aside to call on quickly when needed is a cornerstone of personal finance.
How much money do I need in “rainy day savings”?
Experts tend to recommend building an emergency savings fund of between three and six months of wages. Individual circumstances, such as size of income and financial responsibilities, will determine the exact size.
Save first, spend later
The video tutorial How much should I be saving? explains steps to building a rainy day fund. It can pay to build the savings habit by opening a dedicated rainy day fund account, giving the account a suitable name and then setting up automatic deposits at the start of the pay cycle. The MoneyAware blog from United Kingdom debt advice charity CCCS suggests making cash for a savings fund the first thing set aside. Guest blogger Annie Shaw writes: “That way you’ll find it’s the little extras that you can’t afford at the end of the week, rather than the saving. It’s amazing how many of life’s apparent ‘essentials’, such as a meal out or a new jacket, are things you’ll never miss.”