Financially Ready for a Rainy Day
Nora Rhoades, Family and Youth development
If
you are looking for some help outlining a savings goal, brainstorming some ways
to save money when your budget is already tight, or exploring other ways to
prepare for when your life finds a rain storm, reach out to your local Post
Rock District Office. There are also a lot of great financial resources at
America Saves, https://americasaves.org.
Here we are facing more moisture in
north central Kansas. It often seems like the rain comes when we want it to be
dry, and it steers away when we beg for a shower. Too often, with rain comes
wind, hail, and other undesirable things… like mud.
Speaking of mud‒ are you ready for the
days when your life seems to be ‘clear as mud’? I’m not talking about being
ready to pull on your boots and make a splash. Rather, are you ready to
financially deal with the rainy days of life?
A ‘rainy day fund’ is a common phrase
heard when describing an emergency savings account. America Saves shares that
individuals often choose to build an emergency savings account as a first step
toward building wealth. It really is worth considering.
An emergency fund is a savings account
that is easy to access in a pinch, yet not easy to access on a daily basis. It
is an out-of-sight, out-of-mind savings account with the specific purpose of
helping your get through the mud of life.
What types of things can make life
muddy? Life can get muddy real quick after a family member unexpectedly
experiences a medical emergency. Or, when Mother Nature surprises you with hail
damage or a tornado. Life gets muddy due to fires, a broke down car, or when a
family member is no longer employed. I’m sure you are thinking of other ways
your life might get muddy, or maybe how it has in the past. It is definitely
not a matter of “if” your family will face an emergency, but “when” an
emergency will arrive.
America Saves suggests, “Maintaining
an emergency savings account may be the most important difference between those
who manage to stay afloat and those who sink in debt. It also gives you peace
of mind knowing that you can afford to pay unexpected expenses. That’s because
keeping $500 to $1,000 of savings for emergencies can allow you to easily meet
unexpected financial challenges such as repairing the brakes on your car or
replacing a broken window in your house. Not having emergency savings is one of
the reasons many individuals borrow too much money, resort to high-cost loans,
or increase their credit card balances to high levels.”
One of the most effective ways to
build a rainy day fund is to set up an automatic savings plan with your
financial institution. This means that a fixed amount of money is automatically
transferred into your emergency savings account on a set day each month. Once
you set up this transfer, it becomes a habit that is built into your monthly
budget. By keeping your emergency savings separate from your spending account,
you won’t be tempted to use the funds for a latte, night out with friends, or
the newest gadget on the market.
A good starting goal is to strive to
save $500 for emergencies. Once you reach this amount, keep building your
savings toward $1,000 and beyond with hopes that you will secure enough funds
in your rainy day fund to cover three to six months of your daily living
expenses if life gets muddy and the unexpected happens.
Setting a savings goal, like building
an emergency savings account, is an essential part of being financially secure.
Once you have your goal, you can outline how much you are going to save, how
often you are going to transfer the money toward savings, and what lifestyle habits
are going to support reaching your goal.
