Planning a change? Here’s why you need a rainy day fund

31 August 2021

Savings

Jonathan Smith

Planning a change? Here’s why you need a rainy day fund

Over the last couple of years, we’ve all experienced a huge amount of change in how we live our lives. From how we socialise and see loved ones to how we work and commute, many aspects of our lifestyles have shifted profoundly. The pandemic, it seems, has also been a wake-up call for many people to consider what it is they hold dear.

Three-quarters of Britons said that they had re-evaluated their lives during the COVID period, according to a report by the think tank Global Future. Around a third thought about changing jobs, another third decided to move home, while 1 in 10 contemplated ending or starting a relationship.

However, while the pandemic has been a time for reflection, it has not been a time for action — 80% of respondents have done little or nothing to make a change. The most widely cited reason for this was the financial concerns of doing so (39%). It’s apparent one of the biggest barriers to improving life is uncertainty when it comes to money.

If you’ve put off a big decision because of financial reasons, you may have given up and said “I can’t afford it” or “It’s too much of a risk”. But, what if you could take action? What if you could start making small decisions that would eventually give you the freedom to make that big change? The solution: saving up a rainy day or emergency fund.

The benefits of having a rainy day fund

When you are thinking about making a big change in your life, a rainy day fund can give you the safety net you need. But the benefits run deeper than just providing financial stability, and your life could be improved in a few other ways.

Financial stability

Let’s start with the obvious benefit of building up a rainy day fund. When you have a bit of money saved away — enough to cover your living expenses for a while — you will be providing yourself with a stable platform to go ahead with your big life change. Whether this is as a buffer for when you switch careers or as a fund for covering the extra costs of moving out of your family home, you will have the financial freedom to do so.

Cover for the unexpected

Life is full of surprises, but not all of them are positive. Your rainy day fund can help you deal with those unexpected expenses that might otherwise have impacted your life (and set back your goals). While having to use your savings to cover emergency costs may not be what you had in mind, it means that, though you may have to delay your plans, the unplanned financial impact won’t affect your day-to-day living.

Peace of mind

Nearly a third of Britons said that they were worried about their finances because of the economic downturn caused by COVID-19 (Mental Health Foundation). When you’ve built up a rainy day fund, you can remove some of the stresses that are more common in these uncertain times. You’ll be able to sleep at night knowing that you’ve got a backup plan, as well as the freedom to pursue your goals when the time comes.

Room to be patient

The financial stability provided by a rainy day fund can also give you the room you need to be patient and make the right decisions. For example, if you lose your job or decide to quit to make a career change, you can give yourself the space to pursue training that will enhance your CV and you won’t have to take the first opportunity that comes along if it’s not right for you. In the long term, this extra time could prove to be crucial.

Financial discipline

When you start to put money aside for a rainy day, you will be developing a saving habit that will prove useful for the rest of your life. This financial discipline can play a big role in building for the future and reaching your life goals. It’s also important to remember that if you’re saving a little at a time, try not to get hung up on the amount. Instead, you should give yourself credit for performing a positive action.

Starting your rainy day fund

So, now we’ve highlighted the numerous benefits of starting a rainy day fund to help you support those life decisions, you’re probably eager to begin, right? There’s no time like the present! No matter how small or big your savings will be, you’re making a great decision — now you just have to get started.

We recommend that you kick things off by choosing the right type of savings account to match your needs — read our blog post to find out more. You should also check out our two great saving products in our Instant Saver and Fixed Saver, both of which would be a great place to start building your rainy day fund.

Defining your goal

Over the last year or so, we’ve spoken to a lot of consumers in an effort to realise what motivates them to save for a rainy day. We’ve heard a lot of reasons, including saving for a holiday, home renovations, unexpected costs, and just for a better future, but we have learned the most determined savers often have a clear goal.

With this in mind, we’d also recommend sitting down and thinking about what it is you really want — what is the big change that you’re working towards? Once you’ve got an idea of what the goal is, you might just find an extra level of determination to reach it.