How to build a rainy-day fund today

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How to build a rainy-day fund today
It’s sometimes hard to prepare for rain when all you see is sunshine.

That might sound like something you would read on a fridge magnet, but the realist in all of us knows that, though it may seem sunny outside now, there’s always the possibility of a change in the weather and the best thing is to be prepared.

Saving a pot of money for ‘just in case’ can sometimes seem tedious, but it doesn’t have to be. We’ve pulled together some tips and tricks to set you off on the home run, saving towards a financially happy future.

First things first

Before you get started on your rainy-day fund, make sure all your debts are cleared. It’s hard to focus on saving money when debt is looming overhead.

We’ll come back to the topic of debt in the near future but, in the meantime, take a look at the National Debt helpline website. It’s filled with a plethora of tips, advice, and useful videos that we hope will help.

What should my fund be used on?

This isn’t a regular savings pot that can be used when you fancy that new pair of shoes, would really like the latest product on the market, or just fancy a nice holiday. Your rainy-day fund is for ‘essentials’, things you can’t get away with not paying for. Your needs. For example, if your boiler breaks, roof caves in, or (scary, but it happens) you’re left without a job and need money to tie you over. For those times when it’s raining and you just can’t find shelter, that’s when you use this savings pot.

How much do I need to save?

Research by Neyber found that 34% of working Brits have just a month’s salary or less saved up, and 14% of people have no savings whatsoever. This isn’t great, but is unsurprising given the current economic climate.

According to the Money Advice Service, you should try to have three months’ worth of essential outgoings saved for your rainy-day fund. So, if you spend £1,500 a month on mortgage or rent, food, heating bills and other necessities, you should aim for £4,500 in emergency savings.

That might sound like a lot, especially when you have other, short-term savings priorities alongside this. But the key to building your fund up is saving little by little. Sometimes it may seem that small savings / cutbacks are insignificant and won’t make a difference but that couldn’t be more wrong. Saving is a marathon, not a sprint.

Where should I save the money?

Separate your rainy-day fund from your usual bank or savings account(s) to avoid spending temptations.

The thing about the weather is, even if you’ve checked the forecast, you don’t know when it’s going to pour, so it’s essential to have your money in an accessible place. Consider an easy-access savings account so that you can get to your money quickly and easily. For more info around accessible savings accounts available, click here.

You don’t have to do it on your own

The thought of having to budget, scrimp, and save all this money on your own can sometimes feel quite daunting, but it needn’t. There are lots of apps out there that can help with budgeting and building your savings up bit by bit.

Click here for a rundown of the best budgeting apps available in 2019, as highlighted by Which?.

Standing orders save time and money

Consider setting up a standing order from the bank account you get your wages paid in to, into your savings account. Set this up to leave just after pay day.

This is a great way to avoid the temptation to spend that money, and it’s likely that you won’t even notice it’s gone from your bank account.

Are you a low earner, and worried you can’t save much each month?

Have you heard of the Government scheme, Help to Save? This initiative was started in 2018, and is available to working people on tax credits and universal credit. The scheme rewards savers with a 50% bonus on top of what they save, up to a maximum bonus of £1,200. It allows the saver to put away between £1 and £50 per month and, at the end of two and four years, it pays the 50% bonus.

If this sounds like something you could benefit from, click here for more info.

Declutter your life

Time for that well needed spring clean? See if you can make some money from your unwanted items by putting them on sites like eBay, Gumtree, or Shpock. Listing items on sites like these is usually free so, if your item doesn’t sell then you don’t pay, so there’s nothing to stop you from giving it a go!

Anything you can’t sell, consider putting it on Freecycle so that someone else, who perhaps can’t afford to buy these items new, can benefit. That’s less to go in landfill, too.

Cancel unused subscriptions

It can be quite easy to forget about little direct debits coming out of your bank account – a little £5 here, a little £3 there.

Have a look at the services you are signed up to and think about whether you really get good use out of them. If you don’t, consider taking a break and putting the money saved into your rainy-day fund.

Alternately, if you want to cut back but not cut out, consider sharing subscriptions with friends/family. Many services such as Spotify and Netflix allow you to have multiple users and screens on the subscription for just a little bit extra each month. Once this cost is divided up between users, you’ll be spending less money than if had your own, separate, account.

Life can be really tough, we get it. It helps to be prepared. By starting your rainy-day fund today, you can be safe in the knowledge that, when times get tough, you’ll have one less thing to worry about. Get a great umbrella and still enjoy the sunshine. Always use sunscreen 😊

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