Being able to make money is great. Being able to pay off debts is great. Being able to take care of the bills is great. But being able to save money – well that’s just super. Every euro that you save is an investment in your future.
We all have many different reasons to save – could be putting money aside for Christmas, might be saving for a wedding, putting away a few euro each month towards a holiday fund. Whatever it may be, we all know, whether we do it or not, that saving is the right thing to do. But what about saving for the unknown – saving for a not yet established reason. This is what we call a Rainy Day fund or an Emergency Fund.
The car breaks down and needs a costly new part. The washing machine suddenly stops working. You need to take a last minute trip for an emergency. Whatever it might be, we all have had, and likely will have again, reasons where we need to access money quickly, that is not in our planned expenses for that month.
Top Reasons why we should all have an Emergency Fund:
- You won’t get yourself in (further) debt if you have a pot of money that can be used for emergencies
- You can cover any items that you may have accidentally forgotten about while doing your monthly budget
- You can support your needs should your income decrease or stop
- You can protect your other savings should an emergency arise – no need to cancel the holiday plans
- You will have less stress when the emergency arises
So obviously the only way we can build up our Emergency Funds is by having the ability to set aside some money every week or every month, and putting that money somewhere that you aren’t likely to dip into. Take a look at your monthly spending and check the following things:
- Could you afford to save a little more each month?
- Could you alter your budget to redirect some of your existing saving habits to an emergency fund?
- Could you cut something out and sacrifice it in order to build up an emergency fund?
- Could you increase your monthly income in some way?
Very often the easiest way to quickly build up money is by cutting something out of your spending, perhaps going without something that isn’t absolutely necessary or finding cheaper options for something that you use. I previously talked about switching providers – perhaps the money saved by switching providers can be deposited into the Emergency Fund.
Think of it – if you put as little as €100 each month into your Emergency fund, you will have €1200 saved after 1 year.