Save for the Rainy Day

A penny saved is a penny earned...Benjamin Franklin. Setting aside funds for those unexpected financial hurricanes and tornadoes that will strike unexpectedly takes some financial commitment and discipline.

We can never be sure of the origins of the old adage “Save for a rainy day”. Some claim that it dates back to the days when the dominant profession was farming, where on days of bad weather, all trade was brought to a halt thus requiring that some sustenance be set aside for such periods. Others claim that it is just a financial spin on the contrast between a bright, sunny day and a dark, stormy night. Regardless of the origins, one thing is certain; it must rain sooner or later.

There are two types of rain, predictable rain and unpredictable rain. With predictable rain, you not only know when it will rain (thanks to forecasts), but you tend to also know how much rain will fall and where it will fall e.g. birth of a baby, school fees, insurance, a new house etc. Unpredictable rains are more challenging because they occur unexpectedly and in ways never previously experienced e.g. health related emergencies, sudden death of a loved one or benefactor etc.

Given the differing characteristics of rainy days, one must prudently set up different savings plans to cater to each type. For the predictable obligations, where there is a fair knowledge of the financial commitment and time in which the commitment is due, you can set aside a specific amount per month into a savings account through automatic, pre-programmed transfer instructions. Fortunately, with predictable obligations, you typically have a fall-back investment or source of funds that you can look to tap into if you anticipate that you will fall short of your savings target as the due date draws closer.

For unpredictable obligations, the general rule is to set aside a certain percentage of your income (usually 10%) into a savings account which you never, ever touch. These funds are not for unexpected financial drizzles that may occur from time to time, but for the financial hurricanes and tornadoes that will strike unexpectedly. It is important to note that, when experiencing a financial hurricane, nothing is more valuable than cold, hard cash, therefore such funds must never be in an investment that cannot be exited within a day without incurring a loss. Also the funds in this account must be accessible to an alternate party with specific disbursement instructions, should the hurricane leave you incapacitated.

A myriad of financial products exist to assist you with achieving your financial goals which are beyond the scope of this article.

However, you can consult your GTBank relationship manager for advice on how to achieve your savings goals and for information on which products and services will satisfy your needs.