We’ve all heard the old adage that we have to save for a rainy day. Most financial planners encourage you to have a rainy day fund. And, well, no matter where you live you know that one day it is going to rain (both literally and figuratively!).
Whether you rent or own, live with a roommate, have your own car or ride the bus you know that something will always come up that you didn’t originally plan on having to pay for. It could be a medical situation that requires hospitalization or even a few rounds of antibiotics that set you back a considerable amount of money.
My bubbe always told me that even emergencies can be planned for if you anticipate that some day something might just go wrong. Bubbe comes from a time where being prepared was a way of life. And she’s continued with a variety of different ways to keep that going in her life.
Now that many health care plans have high deductibles, we could be saving a small amount each month ‘just incase’. There are also doctor and prescription co-pays that need to be paid. Sure, we never intend to use them but what if? By saving a few dollars along the way, you can be a little more prepared if the unintended happens.
But how do you save for a rainy day? Here are three ways to get you started and help you be prepared.
1. Save all your change every evening – At the end of the day take all your coins – even if it’s just the pennies, nickels and dimes – and put it in a jar. You’ll be surprised at how quickly change can add up. No, it won’t magically multiply into thousands of dollars over night but you’d probably be surprised at what you’ll have at the end of a month.
2. Set up an automatic transfer with your current account – Even transferring $5 a week can give you $20 at the end of each month (on average). You can use an online bank such as ING or HSBC if you want to keep the money from your immediate temptation. Of course you can open up an additional account at your local financial institution too. Just make sure you set up a weekly or monthly automatic transfer or keep a reminder to make the transfer.
3. Pay with cash – if you normally charge routine purchases to your credit or debit card, you may be spending more than you really want. If you allocate a set amount for the week, you are more likely to stay within that budget. Anything left over at the end of the week can be put in your savings jar.
By taking small steps, you can give yourself peace of mind knowing that there is a rainy day fund ‘just incase’. And, of course, Bubbe has insight about making your savings tangible.
Do you have other ways you save for a rainy day? I’d love to know, and I’m sure others would too!