We’ve all heard the saying, ‘When it rains, it pours’.
This applies to financial situations, too, which is why some personal finance experts recommend preparing the proverbial umbrella–a rainy day fund–before that drizzle or downpour.
Now, though a rainy day fund is similar to an emergency fund, its functions differ slightly. They both act as safety nets for surprise expenses, but an emergency fund is a buffer for the big surprises, such as unexpectedly losing your source of income, while the rainy day fund is a cushion for the smaller surprises that are likely unaccounted for in your budget.
These small financial surprises may include car repair, a medical bill, or even a utility bill that is higher than usual. So, that rainy day fund will involve you creating a pool of funds set aside to be able to manoeuvre those financial surprises when they do pop up.
Building this “shelter” will help to:
Reduce stress since you know you have a safety net, if necessary;Provide a source to avoid accessing other savings accounts that may be linked to specific goals; andEliminate the need to access high-interest loans, thereby avoiding debt.
Some personal finance experts recommend that rainy day funds be between $80,000 and $350,000, but the amount you decide to save is dependent on your unique circumstances.
Start with what you have, and increase the amount if your financial circumstances improve. The National Commercial Bank Jamaica Limited (NCB) has a savings account–Regular Save–designed to help you save at your own pace, which is perfect for a rainy day fund.
In fact, the minimum amount to open this account is $5,000.
When deciding on a home for your rainy day fund, too, you should be looking for something that is low risk and will allow you access to your funds quickly and as needed.
And since you are looking to build your rainy day fund and not deplete it unnecessarily, you can make deposits when you need to, while you continue to earn interest.
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These accounts can also be opened online.
Now that we’ve established that having a rainy day fund is a good idea, it’s time to get started building that fund now.
A quick tip is to include it in your monthly budget, whatever the amount, and before you know it, saving for that rainy day will become a habit.
Are you interested in opening an account with NCB? Until May 31, use the link www.jncb.com/expo for special offers for people opening an account with NCB.
