Why You need to Save For a Rainy-Day
We all experience unforeseen need for cash, sometimes substantial, in our lives. If you are older than twenty, you almost inevitably have experienced it in some way. The need usually surfaces when we least expect. It may be sudden need for school fees, a large medical emergency bill, a must-have opportunity that would permanently change your family’s life, an unforeseen death or a sudden liability you did not realize you would incur. Most people have few alternatives apart from borrowing money at high interest rate. The rapid soaring of the debt liability soon becomes a worse evil than the emergency it was meant to address. Sounds familiar?
A rainy-day fund or saving is a money you set aside to be utilized in times of unexpected emergencies. It is also useful when regular revenue is disturbed or significantly reduced. The best way of setting this up is to open a bank account, deposit some money in it and continue saving small amounts on the account every week or month. When the amount grows beyond a certain level (in Uganda, say beyond UGX 100,000), you can put it in a safe investment like a unit trust or other forms of a collective investment scheme. Insurance companies and other fund managers have such schemes readily available. This way, you do not only save your money but it grows because of interest your savings accumulate.
You could also put your rainy-day savings on a bank account that provides higher-than-inflation interest on your savings but have little or no monthly fees.
Having rainy-day savings can cushion you from panic decisions in face crises. The late management guru Peter Drucker said “The unexpected is the only sure thing you can reasonably expect”.
Be smart and start rainy-day saving.
Joseph Sserunjogi – FRIENDS Consult Ltd.