The Importance Of Saving Money For A Rainy Day

This is a guest post written by Timothy Ng, a personal finance writer for Balance Transfer Card.

From time to time most of us could do with a little nest-egg of funds to help pay for any unexpected bills or luxury expenses. Therefore saving money and keeping an emergency fund is pretty much a must-have for all. No one can predict how life turns out. If you are one step ahead, with a nice surplus of savings in your bank, you will always have peace of mind about your finances.

How financial emergencies can impact your life

A financial emergency can strike at any time; you could lose your job overnight, have a bad accident, or find yourself with a large unexpected bill for your car. Relying on a loan or credit card in a financial emergency is dangerous, because you can end up with more debt.

It is quite obvious that a financial emergency could wreck your life for a long time if you are not adequately prepared. Plan your emergency fund early and then work that plan.

How much should you be saving?

When it comes to emergency funds, most experts agree that you should put aside three to six months worth of savings for a rainy day. This varies of course. Families with kids might be best advised to save more than that to avoid any unnecessary shortcomings in a financial emergency.

If you carry a lot of debt, then you should focus on paying off these debts sooner than later before you even consider saving money for emergency purposes. (Editor Note: Personally I think putting together a small emergency fund first is important so you don’t incur more debt with little emergencies here and there but keep it reasonable. Debt is a huge burden that has to be addressed as quickly as possible.)

What about insurance coverage?

An option is for you to consider taking out income protection insurance. It could come very handy if you ever lose your job overnight and find yourself faced with a large mountain of bills to keep a roof over your head.

How to build up an emergency fund

The easiest way to get started is by starting small. If you are struggling with money management in general you might want to speak with a financial advisor first. The professional can help you by drawing up a feasible budget that even you can stick to while you put some money aside each week.
Smaller chunks of attainable goals are also easier to stick to. If you do, you will soon build up a nice nest-egg of savings. Remember, try and use a high interest savings account for this purpose to earn money on your savings.

Discipline will pay off in the end

Initially it might be very hard for you to save extra money, especially if you never have enough. However, with a bit of discipline you will soon find that saving money is like riding a bicycle. Once you know how to, it will become second nature and fun.

Fast access

Make sure that any account you dedicate to the purpose of saving money is accessible should an emergency strike. The last thing you’d want is to wait for the money to be released by the bank.

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14 People have left comments on this post

» TorreyNo Gravatar said: { May 20, 2010 - 09:05:37 }

I agree that it is important to establish an emergency fund. I think it is important to note that speaking to a financial advisor can be both advantageous and harmful. So it is important to get someone reliable that won't take you to the cleaners with proposing other services such as whole life insurance, CDs, etc

My recent post How to Be the Man at Work

jmichelsenNo Gravatar Reply:

Right on, Torrey. I actually forgot to Note on that part as well, if you are a DIY kind of person, there is plenty of information out there that you can use and avoid going to a financial adviser altogether. They really do have a bit too much control in my opinion and you need to find someone you can trust. If you have a trusted tax guy, they are usually a good source of financial info as well!

StephanNo Gravatar Reply:

i dont think you should group CD's with life insurance. CD's are a great way to invest money for a relatively short period of time

jmichelsenNo Gravatar Reply:

I agree, CD's are a great tool and can protect your money from one of the biggest money wasters out there…you 🙂 If ya can't touch it, you can't spend it!

» TorreyNo Gravatar said: { May 20, 2010 - 12:05:05 }

Great points. Totally with you on a trusted tax guy. Most times they'll save so a bundle of money!
My recent post How to Be the Man at Work

jmichelsenNo Gravatar Reply:

Money's money right 🙂 Tax guys know their way around most of the time.

» Derek | Past DueNo Gravatar said: { May 21, 2010 - 10:05:10 }

Thanks for the post here.

It seems many of us live with the mentality that we're immune to emergency situations (I've also met some folks who are emergency prone, but they're fewer than the invincible crowd). And then, all the sudden, life happens.

Money magazine did a study and found that 78% of American have a major, negative financial event in any given ten-year period of time. So, it's not a matter of if it rains, but more a matter of when.

I'm with you guys on having a good tax guy; they're worth their weight in gold!
My recent post 106 Past Due – Saying ‘No’ in a ‘Yes’ World

jmichelsenNo Gravatar Reply:

Derek, I like to remind myself of the idiom, \”..the calm comes right before the storm\”. Every time I'm feeling really good about my situation, and everything is progressing well, I say that phrase to myself so I won't let up. You can never know what will hit you. Even if you prepare a good sized emergency fund, something unimaginable could a real storm! or earthquake or anything for that matter. You can't stop preparing for the unforeseen because you think you are ready enough.

\”You gotta keep running\”

» [email protected]No Gravatar said: { May 24, 2010 - 07:05:00 }

Now that the world is facing a financial crisis, we should be seriously considering saving more than enough for the rainy days. This article is so helpful! I learned a lot from this!

» jmichelsen said: { May 25, 2010 - 10:05:09 }

thanks Jesseca, and I agree. You can never save enough!

» stevenNo Gravatar said: { Jun 8, 2010 - 05:06:48 }

What a great post. I loved your post, it actually tell you why to save our money for your betterment. I loved all the points that you described. All of us must keep attention on that thing and implement in day to day life.
My recent post What is Considered to be a Good Credit Score?

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