How to Build a Rainy Day Fund for Your Family
A rainy day fund is a pot of savings that is set aside to use for emergencies. This emergency fund is great to have in case someone in the household gets ill and needs care or loses their job for example. These emergency savings are also handy to have if you need to replace a big ticket item that has unexpectedly broken – a car or a washing machine and so on.
We don’t know where life is going to take us and what is going to happen in the future. Even the very next day is unpredictable and to protect our family and our home, we should try to be prepared for unexpected changes in finances and lifestyles.
- Work out How Much to Save
When you’re first starting to think about setting up a rainy day fund for your family, you are probably wondering how much you should aim to have saved up as a minimum.This figure will vary depending on where you live, what kind of income you’re used to, your expenses and your lifestyle habits. As a general rule of thumb, the experts recommend aiming to have at least three to six months of living expenses saved up to help your family get through any sudden financial emergencies that might come your way.
It’s best to keep your savings in a savings account and since you want to be able to quickly access the money in an emergency, make sure the money is not locked away somewhere where it’s difficult to get when you need it.
Set a goal for how much you want to save each month to reach your family’s rainy day fund minimum and set up a monthly transaction from your current account to the savings account. It’s a good idea to have this set up for straight after your payday so that you are not tempted to spend the money instead.
- Adjust Your Spending Budget
At the start it is likely to feel difficult to reach your savings goal but you’ll get there. Keep going with your monthly transaction but also have a look at your current outgoings and see if there’s anywhere where you can reduce your spending and instead use the money for your savings to help you reach your goal faster.
- Invest to Earn Extra Money for Your Fund
One of the best ways to build your savings is to add an extra income stream to the household. There are lots of side hustles that might be possible, or you can choose to invest some of your money to make it grow. The stock exchange is one option, or you can look into digital currency which has gained a lot of popularity over the recent years. If this is something you’d like to try, you can use sites like bitcoin circuit to let you trade efficiently. Put all your profits aside for your rainy day fund and it will soon be a healthy pot of savings. There are lots of other ways to earn extra money too, like starting a side hustle to work on alongside your regular day job.
Cryptocurrencies are unregulated in the UK and any profits may be subject to capital gains tax. As with all investments, there’s an element of risk and the value of your investments can go up or down.