Do you have a Rainy Day Fund?
Do you have money socked away in case of emergencies? Too often, when we are battling debt, we tend to focus on the debt side of our asset sheet almost blindly.
It is imperative that you try to sock away cash towards savings as regularly as you would pay down your debt.
Recently, the Bank of Montreal released the Rainy Day Fund Survey which showed that, while on average Canadians are socking away more money to cover emergency spending (which is good), most only have enough on hand to tide them over for a month or two (which is not good).
The thing with weather forecasting, is that it is never completely accurate. The same applies to Rainy Day saving. You don’t know what the future will hold, so you must plan accordingly. A Rainy Day Fund is your equivalent to leaving the house in the morning with an umbrella- just in case.
Bring Stress Levels Down
Emergencies, given that they are unexpected are very stressful. There is often emotional and physical strain involved. By socking money away, you are potentially alleviating the financial stress associated with an emergency.
Build Good Habits
Feel like you don’t have enough money to bother saving? Wrong! Literally every little bit counts.
Money stashed away now can be earning you interest that will accumulate over time- making your savings grow without you padding the accounts with more.
Many employers offer automatic savings programs right from a paycheque. Your local bank likely offers a “Pay Yourself First” automatic savings program in low denominations. By taking savings right at the source, you will become accustomed to it and not even feel that it is “missing”.
Open up a separate account (either a savings account, or a lower risk type investment which you can decide upon with your financial advisor) that is specifically for emergencies. Don’t dip into it for vacation or other spending.
This is your go-to stop when your car breaks down, or for more serious situations like job loss.