January 2025 must read article 

Saving for a Rainy Day

Life is full of surprises. Some good, others less so. Even the nicest changes and opportunities often come with some sort of hidden financial pressure.

You might be heading to work one day and someone bangs into your car, damaging it. Suddenly you need to pay insurance excess, this is an unplanned expense, where does the money come from?

When life throws a spanner in the works, it would be great to have some funds already set aside to help overcome these challenges.

This is why it is beneficial to have rainy day savings.

How Much Should You Save?

It is hard enough to save anything at all these days. Everything is so expensive that you may have very little to set aside. When considering how much to save for a rainy day, it is hard to know how much you should set as a target.

Some emergencies are small, e.g. getting a headache and having to head to the chemist to buy some pills. Other emergencies can be massive, like being retrenched and not receiving a regular income.

This is why a rainy-day fund, should have as much as you can realistically set aside without having to skip on essentials. It’s no good saving towards an insurance excess, if you can’t afford your insurance premium.

Any rainy-day savings are going to start small and build up over time. First, you will save a little, resulting in being able to afford smaller unplanned emergencies. That’s great, hopefully over time, you will eventually save up enough to help you cope with bigger emergency expenses.

Tip: Did you know you can automate monthly transfers to your emergency fund, so you can make consistent progress without having to think about it?

Keep Those Funds Separate

If you keep your rainy-day savings mixed in with your regular monthly banking account, you will quickly find you will spend the money. It is much better to use a separate bank savings account or maybe a savings pocket.

This will also help you keep track of how your savings are going. You can even automate a small transfer of the same amount into the savings account each month, to make sure you don’t forget.

Emergencies are often sudden, so you should have an account or service where you can withdraw money quickly, without any penalties. This is why savings pockets are often popular, but a high-interest savings account or money market account can also be a good choice, they offer access while still earning decent interest.

Just Keep Saving

Because emergencies come and go, your rainy-day fund balance is going to fluctuate too. Sometimes it will look nice and healthy, and other times after an emergency it might look really minor.

That’s alright, these savings are there to be used. They are there to cushion your fall when things go wrong, so you don’t have to rely on expensive credit or beg your family for help

As time goes by, you may need to review how much you are saving each month. Have you received an increase or changed jobs? Could you regularly save more? Do you need to increase your saving target, as life gets more complicated and more expensive?

Whatever the case, and no matter how often you have to raid your rainy-day savings, the trick is to just keep saving something, big or small. It can really help with life’s unexpected disasters.