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Sometimes, things don’t always go to plan. But luckily, there’s plenty of ways to prepare yourself for an emergency or change of circumstances. One of these is setting up a rainy-day fund, which will help equip you for any hurdles down the line.
There’s no time like now to start planning for financial setbacks, particularly if you are a student at the beginning of your career. Read on to find out how to set up a rainy-day fund that works for your goals and budget.
what is a rainy-day fund?
A rainy-day fund is essentially your financial umbrella. Something you’d hope not to use that helps you out in sticky situations.It is typically set aside for unexpected expenses, whether you need to repair your car, replace your washing machine or are facing a sudden change in your living situation.
Having this buffer can prevent a small setback from turning into a financial downpour. Creating your rainy-day fund doesn’t need to be scary or unachievable.
why is it important?
Unfortunately, you never know when life throws curveballs. A rainy-day fund is vital for short-term financial issues, such as replacing a broken fridge, as well as long-term troubles, like a loss of job or needing to care for a sick relative.
With an emergency fund in place, you can feel much more comfortable knowing that if the worst happens, you can be financially prepared. And, as a student at the start of your career, there’s no time like now to start setting one up.
how do I create a rainy-day fund up?
Your approach to a rainy-day fund is dependent on your own circumstances, however many recommend that you should have at least three months' worth of bills and outgoings to prepare you for any situation.
While that is the recommendation, you should opt for an approach and amount that is manageable for you. To get started on your rainy-day fund, follow the below basic steps
set a goal
Decide on a savings goal and how much you want to set aside each month. Make sure this is an attainable amount – you’ll be much more motivated if it’s realistic. And remember, you can always add more money on months you have less outgoings.
find a savings account that works for you
There are various savings accounts available depending on your needs and requirements. Do your research and find one that works with your goals.
automate your savings
Set up a standing order to transfer a fixed amount from your current account to your rainy day fund each month. Out of sight, out of mind - but readily available when needed.
track your progress
Seeing your savings grow is a great motivator. Regularly monitor your rainy-day fund to stay on track.
Take a look at our article on how to make your savings work, find out more about the best savings accounts for your needs.
Remember, whilst setting up a pot for a rainy day is beneficial in the long term, you should always ensure you can afford essential living costs.
Need financial support? If you're finding it tough to save right now, are struggling to afford essentials or are experiencing financial hardship, get in touch with our support team.