At the end of the day, everyone could benefit from an emergency savings fund. Are there times when you wished you’d saved money for a rainy day?
When your hot water system at home breaks down in the middle of the coldest winter ever (#winterhascome) and before dialling a repair person, you check your bank balance: $13.90.
Hello, week of cold showers and bad hair until next pay day. Ugh.
Or, when it’s your mum’s 60th birthday on the third week of your monthly pay cycle and when you duck out on your lunch break to grab a hundred or so to buy her that amazing gift you’ve been planning for months, the ATM spits the dummy: “Insufficient funds”. Your balance? $4.76.
You walk dejectedly back to the office wondering which Canva design you’re going to use to create an ‘IOU’, which your mum will smile and laugh at but it just isn’t quite the same as an actual gift…
Or when your son or daughter comes home with a notice about a school camp that costs $600 you just don’t have right now.
You can’t work out what’s worse – telling your child they can’t go (cue: hysterical wails from behind locked bedroom door) or having to go to your parents and ask them if you can borrow the money from them so their grandchild will come out of their child-cave before they turn 18.
If any of these, or any number of other “insufficient funds” scenarios sound familiar, it’s time to think about setting up an emergency savings fund.
Insufficient Funds = Insufficient Fun
Don’t sweat it, we’ve all been there. No one is perfect when it comes to managing money. Yet, having some cash stashed away for a rainy day is the way to ensure those $4.76 moments happen less often.
So, rather than getting all twisted up about struggling to cover emergency situations, look on the bright side and realise you can plan for these times by asking yourself a few simple questions:
- How much emergency savings should I have?
- How do I start saving?
- Where should I keep my emergency savings fund?
- When should I use the money?
1. How Much Do I Need in My Emergency Savings Fund?
This is one of those “how long is a piece of string” questions because, obviously, everyone is different. How much you need to have set aside for an emergency fund will vary from individual to individual.
To work out how much you personally need, the most effective method is to keep a budget for a month. This is made less painful by apps like Spendee, which are super easy to use in that you can plug in what you spend on-the-go. With this data (don’t be scared of the “d” word) you’ll have a solid snapshot of your expenses. Consequently allowing you to get a feel for how much your emergency savings fund should be.
There is also another method that’s simpler (if less targeted) than keeping a budget. But, it’s arguably a quicker way to kickstart your savings. Pick an arbitrary amount of either $1,000 or two weeks of your pay, whichever is more. Either way, this should be a solid chunk of cash to go towards covering a range of emergencies from broken down cars to broken elbows at footy practice.
2. How Do I Start Saving?
Let’s not BS each other about this. Pulling together the money you need to set up your emergency savings fund isn’t going to be the easiest thing you’ve ever done.
BUT you can actually do it, especially if you follow some simple hacks to get it humming along:
- Buy less stuff. Okay, sounds obvious but if you can do that little monthly expense tally experiment we talked about above you’re probably going to see a little excess fat you can trim from your weekly and monthly expenses. Buy one less coffee a day and drink the crappy-not-so-crappy work coffee. Take leftovers for lunch twice a week instead of buying a Poke bowl. Meet a friend for a coffee instead of brunch because you’re there for the chats as much as anything, right?
- Sell more stuff. You love things like Playstations and books and your DVD collection (even with Netflix) and your wardrobe full of un-worn clothing from 2014. Pare back these things and get yourself onto eBay or Gumtree to sell the hell out of them. Be brutal and BANG you’ll have a couple hundred dollars quicker than you can say Declutter me Marie.
- Set up an auto savings debit. Once you’ve set up the account (see below) where you’re going to have your rainy day money squirrelled away, set up an auto debit from the account your salary hits each pay day. Start off small, maybe just $10 per pay period and you probably won’t even miss it, and then amp it up over time until you have a regular savings pattern your mum and dad would be proud of. Oh, also banks love this kind of thing too because it shows them you CAN SAVE, so it will help you down the track when you need loans.
3. Where Should I Keep My Emergency Savings Fund?
Under the bed is not the answer… besides obviously not being the safest place to be saving money for a rainy day and gathering dust (time to vacuum under there), most importantly cash money doesn’t gather interest.
However, thanks to the great gods of all things digital, it’s easier than ever to set up bank accounts and keep money somewhere that’s both safe and, importantly, where your money can make money by just sitting there being money.
Nowadays, most financial institutions, big or small, offer high interest online savings accounts because thanks to the wonders of tech (Nifty loves tech. Love love loves it), the costs involved with managing these accounts have dropped.
You can see a nifty (see what we did there) list of high interest online savings accounts thanks to comparison sites like Finder, but to give you a snapshot, here are an example of some of the kinds of rates that are currently available:
|Ubank||2.87%||0||$200 per month||–|
|AMP||3.0%||0||$0||Reverts to 2.1% after 4 months|
|Suncorp||2.6%||0||$200 per month||–|
|Citibank||2.9%||0||$0 per month||Reverts to 1.6% after 4 months|
Choosing the Right Savings Account
To be clear, we’re not saying any one bank is better than the other and ultimately it’s up to you to do the research to find out all the terms and conditions that exist with each institution’s account. Plus of course the rates above will change over time, so don’t take them as gospel, just examples!
But as you can see, most online savings accounts offer WAY more interest than what a normal savings account does PLUS they have the added benefit of your savings being tucked away somewhere you usually can’t withdraw directly from with your ATM card. Some even offer extra “encouragements” by offering higher interest when you deposit a certain amount each month or at the very least don’t withdraw any money.
NOT that we’re saying you can’t be trusted with money, but every little savings hack helps, right?
If you’re having trouble choosing the right online savings account, speak to your current main bank and see what they can offer, or if you have an accountant or financial adviser, ping them for some advice.
Either way, don’t hesitate or mull it over for too long. The sooner you set up the account, the sooner you’ll be on your way to achieving your savings goals and feeling a whole lot better about the rainy days that could lie ahead.
4. When Should I Use My Emergency Savings Fund?
We’ve thrown up a few situations when an emergency savings fund might come in handy. But the terms “emergency” or “rainy day” can mean different things to different people. Despite this, there are some things that probably don’t qualify as an “emergency”. For example, your mate’s Buck’s Party at Falls Creek this weekend or new Jimmy Choos.
We’re not saying it’s WRONG to save for or want any of these things. However, it might be a bit of a push outside of an episode of Sex and the City to justify them as reasons to dip into the emergency fund.
Bottom line: Setting up realistic parameters about when the emergency cash fund can be drawn upon is maybe the most difficult but also the most important part of the process. You might need to be a bit hard on yourself. Yet ultimately, you won’t regret it when that rainy day comes along and you need to pull out the financial umbrella you’ve worked hard to set aside.
“Nifty” Alternatives To The Emergency Cash Fund
Of course, no matter how good a saver you are, or how quickly you jump in with setting up that emergency cash fund, there are going to be times when either the fund is dry or where you need more than what you have on hand or maybe even when you’d rather keep the fund for something even more pressing than the sudden financial need you find yourself in.
That’s where we come in.
With the simple mantra of “no fuss, no paperwork”, Nifty loans is the friendly, easy-to-use lender who can try to assist you.
Not only are our loans quick and simple to apply for, but you will usually get an outcome within about 60 minutes of applying (this applies during business hours – even we get to go home once the working day is done and don’t mind the odd weekend to not work!) and have access to the funds not too long after; overnight at the latest.
So the next time you find yourself in a pickle, and your emergency fund just isn’t up to it, Nifty is here with loans of between $300 and $5,000 for everyday Australians. Like you.
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