The Importance of a Savings Account for Rainy Day Situations
A good financial plan calls for saving money, regardless of the interest rate environment. Since we were kids, most of us have had our parents or grandparents remind us to “save for a rainy day.” The idea is that you need to put money aside when times are good so that you’ll have some money if hard times should arise. According to a Time Magazine survey conducted in 2014, “Families in the U.S. still don’t have a substantial amount of cash tucked away for a rainy day, despite the beating the economy took in the Great Recession.”
We all know unexpected issues in life usually happen at the worst possible time. Imagine having a car break down on a vacation trip, needing a roof repair amidst a rainy week, or having an unplanned medical emergency without any financial resources at your disposal. Borrowing money is always an option, but it costs much more than the initial situation, due to interest expense.
Although savings interest rates are low right now, systematic savings over time can assist in managing your financial future. Rates are not always going to be low as in today’s world. Saving money each paycheck is an easy way to build a retirement, emergency or rainy day fund. Most financial advisers recommend having a savings that equates to three to six months of living expenses. Even placing small amounts, like $50 a paycheck into a special credit union savings account can add up over time. There are twenty six pay periods within a year (assuming you get paid every two weeks), which can add up to over $1,300 plus interest. Over a four-year period of time, that adds up to $5,200 plus interest.
A great way to view a savings account is that you are “paying yourself.” Let’s say you just paid off a car loan. By redirecting the amount you paid on the loan into a savings account, the balance can grow quickly. If the payment on the car loan was $300 per month, in one year the savings amounts to $3,600 plus interest. That is almost three times the savings rate at $50 a paycheck.
A solid rainy day fund is perhaps one of the most important tools in developing and sustaining financial security. However you decide to save, just remember that no matter how well things are going, it’s always a smart idea to be prepared for anything that may happen in the future.
More Blog Posts
How Many Savings Accounts Should I Have
Managing finances can become more complicated as you get older and acquire more ‘stuff’ and responsibilities, including taking care of other people. What’s more, this often comes without much guidance or financial planning. Many times people are left wondering, “How many...
What is a digital wallet and how does it work?
In an age where technology is used everywhere, it makes sense that companies would be interested in how to utilize it even further—like making it easier for their customers to complete purchase transactions. This thought process eventually led to the digital wallet. What...
Check out Mission Fed's Checking Checklist
Are you looking for a free checking account? Check out Mission Fed, we have a Free Checking Account with eStatements and much more. Plus, you can apply easily online, over the phone or at any branch.
How to teach your kids great money habits
What’s the best way to teach your kids sound money habits? We believe that good habits are reinforced with regular action. Here are seven ways to start your child’s financial literacy that will last a lifetime!
Search for Mission Fed Branches and ATMs, or 30,000 CO-OP Network ATMs Nationwide