How to Build A Rainy-Day Fund

As the age-old saying goes, save money for a rainy day. Easy to say, but perhaps harder to figure out. I see a rainy-day fund as an emergency fund, one for when the weather turns on you and you get soaked to the skin. Perhaps you lose your job, need important dental work, or write off the car and your insurance won’t cover things. Those are the types of situations where you could get stuck!

The first thing to figure out is how much you need to save. The usual advice of having a ‘three-month goal’ (having enough savings to cover you for three months, if necessary) is great, but I’d like to add to that. Not only should your fund be able to cover you for three months of mortgage payments, bills and food, but an extra portion on top of that just in case. Having that three months allowance if you were to lose your job, as secure as it may seem today, will ensure that you can continue to live while looking for work. I think you should go a step further and put something on top of that, perhaps an extra £500 or £1000, which could be to cover ‘the unexpected’.

Expand your income by selling stuff you no longer use.

Budgeting is key when saving into a fund. You need to be saving out of what you earn, so credit cards are a no-go – getting yourself into debt here isn’t the idea, it defeats the point. Prioritise what you need and where you can make cut backs in your lifestyle. I’m not saying don’t go to the pub, but perhaps go an hour later or leave an hour earlier than usual, or have a couple of pints less than you normally do. Maybe buy some beers in and invite your mates over, rather than going out. You can then put the savings from this into your rainy-day fund.

Expand your income by selling stuff you no longer use. I’ve recently slung a load of stuff on eBay – old books from uni which I barely used but were on the ‘must own’ reading list. They might only bring me £20, but that’s extra money I can pop away. Doing this is also helping me with de-cluttering my house. We had a broken TV in the spare room, put it online and it sold for £25. Take a walk around your house and see what you haven’t used for the last year. Do you need it? Does it bring you happiness? Or is it just gathering dust? Get it sold! Why not turn your hobby into a side-hustle as well? Making money on the side is great, so whether you make cards, sell soap, or knit socks, these can be a great way to make a few extra quid.

Budgeting is key when saving into a fund.

The spare change jar is a good one, it’s a classic. Get yourself a jar and start adding your loose change to it. I hate having loads of shrapnel in my wallet, so if you’re anything like me, freeing your pockets up from small coins is a great idea. Once your jar is full, bag it up and take it to the bank. You can then transfer that amount to your savings account or withdraw it in note form and pop it away. Easy!

If you automate your payments into your savings on pay day every month, it’ll transfer over without you having to do a single thing. Be sure to pay yourself first and continue to pay for things you no longer owe on – only put that money into your own account instead. For instance, if you’ve paid off the car, why not carry on taking that £150 a month out of your account, but instead of to the car company, it goes into your savings fund. You could put your pay rise directly into your fund or if you get some cashback on a purchase, put that in. You’re already used to living without that money so continue that way and grow your savings.

The spare change jar is a good one, it’s a classic.

If the amount you decide you need to save seems like a daunting task, perhaps you could open two accounts to save into. Break down what you need to save into smaller monetary values which feel more attainable. You might decide on even more accounts and it can be a way to trick your mind and put you at ease with your spending. When you add them up, you’ll have the amount you need.

These are just a couple of ways, a few steps towards building your rainy-day fund. I really hope it doesn’t rain for you, but if it does, hopefully you’ll be prepared.