Wish you had more cash set aside for a rainy day? If so, you’re not alone. One third of savers aspire to accumulate 3 months’ worth of income as an emergency buffer, according to ING DIRECT’s Financial Wellbeing Index (Jan 2013) – yet a quarter have less than $1,674 to call upon in a crisis.
If you haven’t yet got round to putting some money aside for financial peace of mind, check out these 4 tips which will get your rainy day savings off to a flying start.
1. Set yourself a goal
Having a goal is the first step towards successful saving, so work out how much you’d like to have in easily accessible funds in case of emergency. Perhaps you’d like the comfort of knowing you have enough money set aside to meet rent/mortgage repayments for 3 months, or maybe you have another amount which will give you peace of mind? Having a specific target in mind will give you something to aim for.
Check out these savings calculators to help you work out your goal and savings plan.
2. Form a savings habit
Whether you can save $25 a week or $200 a week; the most important thing is to make a start. Consistency is the key to forming a regular savings habit, so decide upon a realistic amount that you’ll be able to save. $50 a week might not sound like a lot, but that translates into $2600 saved in the space of a year!
3. Set up an automatic transfer
Make saving easier by arranging with your employer for a proportion of your salary to be paid directly into your “Rainy Day” account. If the money you’re putting aside for an emergency doesn’t even hit your transaction account every month, then it becomes that much harder to spend.
Alternatively, set up your own automatic transfer from your everyday account to your savings so you can ‘set and forget.’
4. Keep ‘rainy day’ funds separate
You might be racking up an impressive balance saving for a new car, and have a tidy amount set aside for your next holiday but don’t fall into the trap of thinking this counts towards your emergency fund.
The whole idea behind building a savings buffer is that it’s there for you to tap into in times of crisis – for example, living expenses in case you lose your job or emergency plumbing in case your pipes burst. So, using the same pot of money for non-essential spending contradicts saving for a rainy day.
Keep your emergency savings in a separate account, give it an appropriate name – for example, “Rainy Day” or “Emergency Money” – and commit to making withdrawals only when you absolutely have to!