What if it rains?
by: JOHN DOE
on: DECEMBER 2, 2022
in: BLOG
A rainy day describes an unexpected and inconvenient expense like your car suddenly breaking down or money requests from friends and family. These things can disrupt your budget, but you can prepare for them by creating a rainy-day fund.
A rainy-day fund is a bank account, or series of bank accounts set aside to pay for unprecedented expenses, such as unemployment, unexpected medical expenses, major car repairs, or any form of needs that require funding.
It is advisable to save unexpected income like bonuses, cash gifts, inheritance, or winning a contest.
Who needs a rainy-day fund?
1. Self-Employed or a Contract Employee
If you are self-employed or an independent contractor, it is important to have a good emergency fund in place.
2. You’re a Homeowner or renting
When you own your home, expenses such as necessary repairs and upkeep arise. An emergency fund helps you handle these costs.
3. You are servicing debt
Your emergency fund can help you stop adding to your debt with every financial bump in the road.
Why you need a rainy-day fund
- To avoid debt
Having an emergency fund that you can withdraw from in extreme cases, makes it easier to avoid debt and the accompanying expensive interest charges. - Encourages a saving habit
Building an emergency fund encourages individuals to reduce the urge for frivolous spending, and to cultivate a saving behaviour - Protects your savings
Having an emergency fund means that you do not have to dip into your savings to cover random costs.
Before building an emergency fund
- Set a target
Calculate the total amount of money you need to save. - Decide on a savings pattern
This will get you into the habit of structured saving regularly. - Check in and adjust
Check in after a while to track how much you’ve saved and adjust if needed.
However, if you’ve saved up enough to cover six months of expenses and have extra cash, you might consider investing the additional funds instead.
Guess what? You can build an emergency fund on i-invest with our high interest savings plan.
