Building a Rainy Day Fund

The desire to build a Rainy day fund or as it is often referred to, ‘An Emergency Fund’ is very common with most people however in reality it never gets started.

Most advice focuses on the general rule that this should be at minimum three months income.

In reality, the simple thought of trying to save that much money can be quite scary and puts most people off even starting.

Living pay week to pay week can feel like it's an impossible task so it is often dismissed resulting in life being a continual rollercoaster of emotions financially.

Below I cover three main reasons why people never get started and also three reasons for you to get started today.

Three reasons why we never start

  1. The ability to do the math sabotages our belief

It is very easy to do the maths and calculate what 3 months income looks like.

We think that to save this amount will take forever and so our brain rationalises it just isn't achievable.

“I can’t save that much that quick” is the result we get by confusing the timeline with the goal.

This simple calculation has just created an unrealistic expectation on the timeline therefore it is pointless even starting.

  1. We assume we can borrow money if we ever need it

For a long time now, it has been relatively easy to access money through mortgage top ups, personal loans, interest free deals and the most recent release of Flexi-Pay options (pay little amounts over several weeks).

This easy access has removed the discipline of saving. In reality it is a very small portion of the population that genuinely cannot save anything. For many, the ability to save is real we simply assume there is no reason to.

Check out your ‘Minimum Savings Capacity’ here

  1. We lack discipline

Offers and opportunities to spend are constantly present. Previous decisions to put savings first have been short lived. We may have started with the intention but then as the savings balance grows some ‘Great Deal’ tempts us to spend it.

Instead of continuing to save for that  ‘Rainy Day’ fund the priority, we use the money and default back to point 2, assume if we need it, that we will be able to just borrow it.

Living for today and hoping that tomorrow someone will help us out.

Three reasons to start today

  1. You are in control of your money

The discipline of saving means you are in control of your money rather than money controlling you.

Your engagement with other financial decisions increases rather than happening out of routine or habit. Your savings capacity increases over time as you find additional ways to save money through adjusting expenses.

These additional ‘savings opportunities’ reinforce your belief that saving is possible.

  1. You have choices

When committed to repayments for personal loans, overdrafts, Flexi-Pay arrangements etc, finances can become squeezed and as a result your choices are reduced for the things that may be important to you.

Savings provides the ability to navigate the unexpected without the need to do so on someone else’s terms.

At times it may still be practical to use a loan however you do this now out of choice not necessity. That choice means the decision to borrow at any time is because it works to your advantage.

Cash also means you can negotiate better deals with most purchases.

  1. Life has less stress

Financial worry is one of the main contributors for stress. Having a ‘Rainy day’ or ‘Emergency Fund’ removes stress because you are equipped with time to plan.

Having savings means you have time to step back, evaluate options, shop around for prices and make an informed decision. Or in circumstances of illness or reduced income you have a resource that allows you to manage financially while you put a plan in place

The ability to step back and work through your options often saves you more money because you aren’t reacting to your circumstances and can make better informed decisions.

Having control of your money, choices and less stress is something everyone should be able to enjoy.

Establishing a Rainy day fund is the perfect place to start.

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