Savings for a rainy day

3 min 63

You’ve been looking into investing money in stocks, funds, and ETFs, and now you want to start investing? All that’s missing are your savings for a rainy day, and you’re ready to go. In this article, you’ll learn exactly what that is, why it’s so important, and how much it should be.

There’s no way around savings for rainy days

Unexpected things often happen. You don’t give it any thought – and suddenly, your bike breaks down, your dog has to go to the vet, your cell phone falls out of your pocket and breaks, your computer won’t turn on, and you don’t get your scholarship. 

In all these scenarios, you need to access money quickly. How can you do that? Panic and liquidate your financial investments? Then you may have to access the money when the rate is terrible and lose your return. Overdraw your account? That can be expensive with overdraft interest. Sell real estate? Not that fast. Asking friends and relatives for money? Not an elegant solution. Paying with a credit card? Not feasible in the long run. 

That’s what savings for a rainy day are for. It serves as a financial cushion, which you can access quickly and without losses when not everything is going according to plan. 

How high should your savings for rainy days be?

Generally speaking, as much as you need. A rule of thumb says that you should set aside two to three gross monthly salaries.  

Of course, the exact amount is individual for each person and depends on the number of your expenses. There are three factors you should consider:

1. Income: If you have a permanent employment contract with a secure income, a smaller buffer is sufficient. As a freelance journalist, you should set aside a little more.

2. Expenses: If you have to pay high rent and pay for your children’s upkeep, you should have a little more money set aside for your savings.

3. Mindset: if you are risk-averse, you will feel more secure with a thicker financial cushion.

It’s worth thinking about the size of your savings for a rainy day. After all, if you set aside “too much,” you’ll miss out on returns or the opportunity to use your money elsewhere. If you set aside “too little,” you can end up in a financial dilemma.

Better safe than sorry

Despite zero interest rates and inflation, a checking account is recommended for keeping your iron reserve. This way, the money is available and is not subject to fluctuations. If you use a separate account, you will only use the reserve in emergencies, and it will not get lost in everyday expenses. 

Peace of mind

The first step in investing should be to build a financial cushion. This will ensure your peace of mind – and liquidity when you need to spend money quickly. Then you can start investing with a firm foundation and build a long-term and secure fortune. So there’s almost nothing standing in the way of your big plans to own a café by the sea or the apartment of your dreams, at least financially.

Pro-tip: In addition to your savings for a rainy day, Unit Plus lets you access your portfolio at any time with your UnitPlus card. If you don’t want to use your savings for a rainy day or it’s not enough, you can easily pay with your portfolio. In the Unit Plus app, you can also set the amount of your savings for a rainy day, which should remain in your reference account in any case. The intelligent algorithm will consider your iron reserve when calculating the ideal monthly investment amount if you opt for the personalized savings plan. As you can see, Unit Plus and the savings for a rainy day go hand in hand. 

Kerstin Schneider