How’s your SoS fund?
This week we thought we’d talk about the weather given there’s 50 rainy days ahead.
For sure, it’s not the most auspicious start to summer, but it’s an opportunity to segue oh-so-clumsily into a piece on rainy day funds and the role they play in shoring up our financial health.
Now no one wants to think there’s hard times around the corner, but they happen. The last few years have shown us that and then some. Having a financial cushion isn’t like having a magic wand – but it tends to grant us options.
More of them, anyway …
So bad doesn’t get worse
We don’t want to throw a lot of doom stats around to demonstrate the likelihood of accidents, sickness, redundancy and so on. But suffice to say those stats exist. Bad things happen.
Okay, just two: recent news says 3,000,000 UK workers are out of action with long-term illnesses, while 90,000 Britons were made redundant in the three months to March 2024.
Any decent financial planner will tell clients that a rainy day fund is an essential ingredient in the foundations of our financial life. Before investing, before big ticket purchases, before paying off some debt even … it’s worth focusing on the rainy day.
Why? Well it’s pure preparation. No one ever said I wish I didn’t have an emergency fund.
Rainy day tips
We don’t have tips for the actual rainy days ahead, except to take an umbrella and make the best of it. If it means more time indoors then why not hunker down and put the following tips into practice …
Calculate. How much you need in your emergency fund depends on your circumstances, but we recommend six weeks’ worth of expenses at a minimum and, ideally, try to build up 12 weeks.
Automate. The best way to build an emergency fund is to automate. Set up a recurring transfer from your current account to a dedicated savings account. Do it on payday to resist temptation.
Interrogate. Set a high bar on what constitutes an emergency. An emergency isn’t I want that holiday it’s more like my car / health / boiler / job is broken. Be strict with yourself. Emergency means what it says.
Brollies out.