With the cost of living on the rise, more and more homeowners are struggling with surprising bills and unforeseen expenses. Credit limits are being pushed and, due to the massive rise in the cost of living in recent years, a large number of people are on a day-to-day schedule, unable to pay for anything beyond their next paycheque.
In tough times, the importance of emergency funds becomes ever more clear. Home finance experts call these funds ‘rainy day’ savings funds, and advise that everyone, whether homeowner or tenant, individual or family member, keep a small amount of savings ready for any surprising bills or sudden expenses.
Why is the rainy day fund so important? Several reasons. The first is that the labour market has, despite a few key improvements, remained turbulent and unpredictable over the past two years. Job security – once a concrete term – doesn’t mean quite the same thing that it did prior to the 2008 financial crisis and recession.
Because of this, planning for a financial rainy day isn’t just a good idea, it’s often far more of a necessity. Experts recommend keeping at least three months of personal expenses saved away in case you’re beset by surprise bills, with six months an even better option.
The growing cost of living is another reason for the importance of a ‘rainy day’ cash fund. Energy costs have risen over the past two years, making it more likely that an energy bill could surprise you and catch you financially off-guard. Keeping a fund on hand makes it easy for you to account for unexpectedly large utility bills.
Preparing for the worst is always a good financial plan, even if you expect the very best to happen. Whether three months or six, keeping a ‘rainy day’ fund puts you in the lead compared to other individuals and allows you to weather rocky financial weather without the stress and worry of a paycheque-to-paycheque planner.