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How much should you have in savings for a rainy day?

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If you’re already struggling to pay the bills or just break even every month, it can be hard to put money aside savings for a rainy day. There are often more pressing priorities and you might just hope that the rainy day never materialises. How much should you ideally have saved for an emergency and how can you build up your savings?

Why Should You Have Savings?

The general advice is that you should have between three and six months wages saved for an emergency. It’s not always practical to have this money sitting in an account, so the amount you choose to save will depend on your individual circumstances.

For instance, do you have dependents or do you live by yourself, what could you cut down on if you had to and would you have another source of income if you lost your job? To work out how much you need to save, consider what you’d need to live on each month and how many months you want to save.

Should You Always Save?

Saving for a rainy day isn’t always the most pressing financial commitment. Many people have large loan repayments or credit card bills and they would be better focusing on reducing these first. Today’s low interest rates mean that you’ll be earning less in a savings account than you would be paying out on debt repayments. There’s no use saving if you’re being charged more elsewhere.

Sometimes you might have accrued some savings, but then need to make an important purchase, such as a car or furniture. In this case you’d be better off taking money from your savings rather than taking out any credit.

It might not always seem like the right time to save, but you need to consider how you’d cope if there was an emergency. This could be a one off payment like a car repair or you could need to survive for months if you lost your job. Without any savings or additional source of income you could be facing serious hardship.

How Can You Save?

-If you want to start a savings account, but you don’t have any money left at the end of the month, or you need money for an emergency, how can you find some extra funds? There are areas in which you can save money, as well as ways in which you can make some more.

-Make sure you’re paying your utility bills and council tax by direct debit. This way you’re spreading the payments out across the year, so you won’t be hit by a large bill in the winter. Many companies also offer a discount for direct debit customers.

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-Have a review of all your insurance and breakdown policies. If there are any that are up for renewal make sure that you research other policies to check if you’re getting the best deal. If you’ve had your life insurance for a few years or your circumstances have changed, it’s also worth while seeing if you can save some money.

-Keep a monthly record of all your income and outgoings and see if there are any areas in which you can save. You might be surprised how much you fritter away on work lunches or unnecessary trips to the supermarket. Instead set yourself weekly limits on what you can spend, take your own lunches and plan your weekly shop.

-If you’re one of life’s hoarders then it’s time for a clear out. Anything from clothes and toys to CDs and ornaments can make you some money. Have a look for local car boot sales or put items up for sale on online auction sites.

-You might think that you don’t have the money to contribute to a savings account. However, if you look more closely you can make changes that will free up some cash. Even having a small rainy day savings fund is better than nothing.

 

 

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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