One of the most important things you can do for your finances is to set aside money for a rainy day. You never know when your car will break down or when you will need to come up with a significant co-pay for a medical procedure. When you don’t have a rainy day fund, these unexpected expenses can be financially debilitating and emotionally stressful. Here are some tips to help you get moving on your rainy day fund and prepare for emergencies:
Your Rainy Day Fund – Start Now
The best time to start is now. “Tomorrow” can stretch into “next week”, “next month”, “next year”, “when I have the money” and “when we can afford it” until it never really gets done. The key is to do it now. Most banks and credit unions will allow you to open a savings account with very little — usually no more than $25. Open your account now, and start saving now.
It’s OK to Start Small
As already mentioned, you can open most accounts with $25. It’s alright if you have to start small, only putting in a few dollars a month. If you use cash a lot, put your change (or even dollar bills) in a jar at the end of each day. Then, once a month, add it all up and take it to the bank.
The most important thing is that you are starting a habit of saving money. As you cut other expenses from your budget, and as you look for more sources of income, you can begin increasing the amount of money you put into your rainy day fund. But first you have to be in the habit of “paying yourself first.”
Automate Your Savings
A lot has been written about the advantages of automating your money — and for good reason. You can automate your savings so that your money goes right into your rainy day fund. You can have the money taken from your paycheck and deposited directly into your savings account, or you can set up recurring transfers that move money from your checking account into your savings account once a month.
In either case, the temptation to use the money for something else is removed; you don’t ever really have access to it in your checking account. And your savings account grows at a steady rate.
Look for High Yield Accounts
You won’t ever get really good rates on cash products. That is no excuse not to get what you can, though. High yield savings accounts offer better rates than more traditional accounts. This can help you increase the interest you earn, maximizing your money as much as possible.
You can also look for incentives, such as cash bonuses for signing up for certain accounts, and other perks. This will help you increase the value of your account without too much trouble.
A rainy day fund is essential if you want to achieve financial freedom. It helps you cover unexpected expenses, and can aid you in the event that you lose some of your income. Don’t delay starting a rainy day fund, even if you don’t have a lot to put in it right now. The important thing is to get started, and develop a habit of preparing for the future.
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