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Managing your cash flow and savings for the future is tricky business, especially in today’s tough economic climate. Rising interest rates and the increasing cost of living can seem daunting or overwhelming. But, with a little planning and some discipline, you can build up a rainy day fund that will give you the assurance of financial stability in challenging times.

What is a Rainy Day Fund?

A rainy day fund is a term that refers to a savings account that is set aside for emergencies or unexpected expenses. The purpose of this emergency fund is to provide a financial cushion during unforeseen circumstances, such as sudden medical bills or losing your job.

How Much Savings Should You Have In Your Rainy Day Fund?

The recommended savings amount for a rainy day fund can vary quite significantly based on individual circumstances. Factors to consider can include whether or not you have dependents, whether or not you have any monthly loan repayments, or whether you have any other high-cost essential expenses such as a medical condition that requires regular treatment or medication.

As a guide, we recommend working towards a savings goal of three to six months’ worth of your respective living expenses. With this cushioning, you can safeguard your financial stability and avoid resorting to high-interest credit cards or loans during unforeseen circumstances.

Budgeting and Saving Strategies

Building a rainy day fund doesn’t have to be a burden, but it does take some effective budgeting. With a little initial effort, your rainy day fund can continue to build in the background, giving you peace of mind that you’ll have a financial safety net should you ever need it

To set yourself up, you’ll need to create a monthly budget. This should be realistic enough that it doesn’t feel impossible to stick to. To determine your budget, it’s best to spend a month meticulously tracking your expenses to identify areas where you can reduce unnecessary spending. Cutting back on some non-essential items and finding more cost-effective alternatives can significantly boost your savings without needing to compromise on bigger things like housing.

How to identify non-essential expenses

To determine your budget, it’s important to take the time to really analyse each of your monthly expenses. As an example, let’s take a look at a gym membership:

In this situation, you’re currently paying for a premium all-access membership that gives you 24/7 access to every gym across the country. And while going to the gym is a non-negotiable for you, the reality is that you always train at the same time, at the same location. Therefore, in this case, the premium membership is a non-essential expense, and switching to the more cost-effective basic membership could allow you to put the difference towards your rainy day fund each month.

Some other non-essential expenses could include:

  • Dining out at restaurants
  • Entertainment subscriptions (e.g., streaming services, gaming memberships)
  • Shopping for luxury or designer items
  • Holidays and travel expenses
  • Eating out for lunch instead of bringing your own packed lunch
  • Expensive hobbies or recreational activities
  • Impulse purchases and unnecessary gadgets
  • Daily coffee shop visits
  • Gambling
  • Beauty and spa treatments
  • Alcohol and bar expenses
  • High-end fashion and accessories
  • Expensive car upgrades or modifications
  • Home decor and luxury furnishings

Remember, these expenses may vary depending on individual circumstances and financial priorities. It’s essential to evaluate your budget and determine which expenses align with your goals and values.

As you work through your spending trends, consider where else you may be able to cut back, such as making your morning coffee at home instead of buying it on the way to work, or ditching that streaming service subscription you hardly ever use. Each time you manage to identify any area where you could dave, throw those savings straight into your rainy day fund.

Another great tip for avoiding overspending on non-essentials is to use an automatic savings plan. These plans can help you automatically transfer a portion of your income straight into your savings account, so you’re not tempted to spend it.

Maximising Income

While it may seem obvious, an often overlooked way to save more and contribute more towards your rainy day fund is to actually increase your income. A common way to do this is to take on freelance work or start up a side hustle to supplement your primary source of income. Or, if you have a spare room, consider renting it out for some additional cash flow. Additionally, requesting a salary review with your current employer to negotiate an increase or bonus may also be a viable option.

Investing and Building Wealth

Once you’ve built a solid rainy day fund, it’s important to continue investing in your long-term financial stability. Long-term investments and wealth building strategies allow your money to work for you and help combat the effects of inflation. Plus, the earlier you start investing, the more you’ll be able to take advantage of the power of compound.

As a first-time investor, low-cost index funds, as well as diversifying your investments, can help maximise your returns while managing risk effectively. However, it’s best to seek professional advice from a financial advisor or planner who can tailor an investment plan according to your financial goals and risk tolerance.


Building up a rainy day fund is a vital step in securing your financial well-being and providing peace of mind. Life is unpredictable, and unexpected expenses or emergencies can arise at any time. Having a dedicated fund that you can rely on during challenging times can help you navigate through financial storms without derailing your long-term goals. It provides a sense of security, reduces stress, and prevents the need to rely on high-interest loans or credit cards.

By consistently setting aside a portion of your income and prioritising savings, you are taking a proactive step towards financial resilience. Start building your rainy day fund today, and enjoy the confidence that comes with knowing you have a safety net to protect you when the unexpected happens.

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