Do you remember when your parents gave you your first piggy-bank and told you to save for a “rainy day”? I must have been 6 or 7 years old at the time. And I still can remember what a good feeling it was when I had more money at the end of the week than at the beginning.

I was always proud of myself when saved a bit of my pocket-money rather than spend it. But unfortunately, as we grow older, the drive to saving money gets less and less. This is due to several reasons:

For one, our needs do get bigger, especially when we start our own family and have kids. Unless you are extremely disciplined by nature, there won't be much money left at the end of the month to be put into your “Rainy Day Fund”...

Secondly, the society we live in these days teaches us “instant gratification” rather than “save for a while and then get what you want” - and with all those nice “BUY NOW, PAY LATER”-offers that we all get in everyday, it is very easy to fall into the trap.

But, there is an old saying which still holds truth: hope for the best, but plan for the worst. No matter how careful we are, there's always the chance that things will go wrong in an expensive way: your car breaks down, your roof starts leaking, or your company "restructures" you out of a job.

Therefore, even in our instant-gratification society, a “rainy-day-fund” IS NOT wasted money. It is in fact money well spent. And if you don't need it because things keep going well for you: EVEN BETTER STILL...

There are three things you need to know about rainy day funds: how much to save, how to save, and where to save.

When calculating the amount of money you need to put aside for your rainy-day-fund, there are a few expenses to consider:

• housing expenses (e.g. rent, mortgage payments, maintenance, heating-bills, necessary insurances etc.)
  
  
• food expenses
  
  
• transportation (car / public transport etc.)
  
  
• old debt
  
  

Those are your basic expenses – anything else does not need to be taken into the account for your emergency fund. As a general rule, you should aim to put enough money to one side to be able to cover your expenses for three months. And be under no illusion, once you have done all your calculations, it will still be a lot of money you are looking at. But don't panic – you don't need to stop eating just to tank up your emergency fund. Even a few hundred dollars can help you get through most emergencies, such as an unplanned car-repair or a medical bill. Over time you can gradually increase your savings to cover even a long-term lay-off.

Build your savings over time

Okay, so you have a few hundred dollars in the bank. How do you grow that to a few thousand? There's really no trick: you just spend a little less than you make every month, and put the money aside so you don't spend it. Small changes can make a big difference over time.

Here are some suggestions on how to lower your expenses so you can save more:

• Review your mobile phone plan to make sure you're not overpaying for data, text messages or long distance
  
  
• Pay your credit card bill in full every month so you don't have interest charges
  
  
• Switch to a cash-back rewards credit card, and save the money you get back
  
  
• Try working out a monthly budget and stick to it
  
  
• If possible, try to put a fixed amount aside every month (even a small amount like 10 to 20 dollars a month). Remember: The important thing here is to GET STARTED. Once you have taken this step, you are on the right track...Should you have more money left over at the end of the month, leave half of the extra-money in your bank-account (for unforeseen expenses) and put half into your rainy-day-fund.
  

At the end of every month, add up what you've saved. Success will motivate you to save even more. And the longer you stick to your new financial policy, the more money you will have in your emergency-fund. Should you be lucky without any emergencies or “rainy days”, just leave the money in your account – AND ENJOY YOUR RETIREMENT.