Do you have a rainy-day fund?

Life doesn’t always go as planned and unexpected events can lead to financial stress. When life gives you lemons, having an emergency fund can be a lifeline.

Health issues, loss of employment, losing a loved one, urgent home or car repairs, moving house: we’ll all experience at least one of these at some point in our lives. In addition to the emotional toll these events can take, they usually involve having to spend money that you might not have readily available.

While your health, car, and home may be insured, insurance may not cover every possible impact of an unexpected event, so there could still be expenses you’ll need to pay for with your own money. This is where having a rainy-day fund or emergency stash comes in.

Having some money saved to use in these events can save you a lot of stress. It can also prevent you needing to use a credit card or borrowing money, which can both lead to more strife down the track.

Even small amounts of money put away over a long period can grow into a sizable rainy-day fund – which could be a lifeline when the unexpected happens.

Here are some tips for starting your savings journey

  • It’s a good idea to have a dedicated savings account that’s separate from your transaction account, to stop you using your emergency funds for everyday expenses. Savings accounts also attract a higher rate of interest which helps your money grow.
  • You should look for a savings account with no account keeping fees, to ensure your stash isn’t eroded by fees.
  • Consider making a budget and setting up a regular direct debit from your transaction account to your savings account.
  • The more money in the account, the more interest you’ll earn – so adding extra amounts whenever you can, even small amounts, can help fatten your rainy-day fund for example, putting away $10 a week can save you $520 a year and that’s without any interest.

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Information in this article is general in nature and does not take into account your objectives, financial situation or needs. You should consider the appropriateness of this information and refer to the relevant Terms and Conditions or Product Disclosure Statement before acquiring a product.

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