Saving for Tough Times

Recent events in the world economy have served as a stern reminder of how quickly and dramatically things can go wrong. If there is one lesson to be learned from it all, it is that we all need a safety net. Here is some advice on how you can save for that rainy day.

There is no bigger wake-up call than the thought of losing your job and your income. And while it is certainly not a pleasant thought, it certainly helps give some perspective on how life could be without that monthly pay cheque.

For most of us it will probably never come to this, but there is certainly no harm in being prepared. First and foremost, it is wise to have a safety net, a nest egg that will help ease the pain if you ever fall upon hard times. If you do not have savings put away for such a scenario, you should start doing so immediately.

The most important part of saving money is effective budgeting. With a little bit of planning and a little bit of discipline you can cut your day-to-day spending significantly. The best way to budget is to draw up a detailed list of your incomings and outgoings. A lot of outgoings, such as rent/mortgage and utilities, are essential. However, many others are not. Find some non-essential items that you can live without. Also, shop around to see if you can get better deals on things like insurance.

You should be able to reduce your outgoings significantly and put this money towards your savings plan. The good thing about budgeting now is that if tough times ever do arrive, you will know how to manage your money. That said, there is no need to live like a monk. Find a balance between sensible spending and a good quality of life.

Now that you have this extra cash to put away every month you have to decide where to put it. You will want to make your money work for you, but you will also want to have easy access in case of emergency. Therefore, a flexible high interest savings account is probably your best option. Shop around for a product with a competitive interest rate that allows you to access your money immediately.

In general, an online high interest savings account such as an ING Direct savings account provides the best mix between interest rates and flexibility. Also, many of them do not impose a minimum initial deposit and you can make lodgements whenever you want. It is wise to have your monthly savings automatically deposited into your savings account as soon as you receive your paycheque.

In all likelihood those tough times will never come. However, having that safety net will give you peace of mind that you and your family will be protected if anything goes wrong. With some careful budgeting and a good savings account, you will be surprised how quickly you can save.