How you can painlessly build up a ‘drizzly day fund’

If a six-month salary emergency fund sounds impossible then here are some ways to help ease you towards a smaller target...

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How achievable does a rainy day fund really feel? Common advice is that it’s sensible to have three to six months’ worth of salary stashed away to ensure you can stay financially afloat in a disaster.

But for many people, including relatively high earners, that can feel impossible – whereas new analysis from Tandem Bank suggests that a more affordable £500 pot could still make a real difference.

The challenger bank has analysed customer spending and calculated that everyone should aim to have at least £500 saved as a “drizzly day fund” even if they can’t afford anything more substantial. Then they at least have a financial lifejacket if they can’t afford the boat.

The bank looked at what its credit card customers spent on unexpected or irregular costs and found they spent an average of £308 per transaction on heating and plumbing contractors, while car repairs and parts cost an average of £443.

A £500 savings pot would help people avoid relying on credit, potentially protecting them from a debt spiral. It’s not the full emergency pot you want to have saved, but it’s a small cushion that can help you avoid getting into debt when the boiler needs repairing or the dog has to have a sock surgically removed from its stomach.

And it might feel more achievable, which is important given that more than a quarter of British people have no savings at all.

So if you feel overwhelmed by the goal of a six-month salary stash as an emergency fund, then set a more affordable target. Once you reach it, you can always grow your savings further without the pressure of having to hit a big number.

Okay, yes, if you find it hard to save thousands then you probably find it hard to save hundreds.

So here are some small ways that can quickly build up a few hundred ready to weather the next drizzly day.

Get some tech support

If part of the difficulty of saving is that it’s hard to motivate yourself to move the cash out of your current account then there are lots of apps that do your saving for you.

Dominic Baliszewski of the Spend it Widely blog and podcast says: “Auto-savings apps are a great way to help you reach your goals faster with less of the stress. Even if you’re just looking to grow your rainy day fund – these services are well worth a look.

“Broadly speaking, auto-saving apps do one of two things – they either ‘round up’ and save, or analyse your spending patterns and move money for you.

“Monzo’s ‘coin jar’ and Moneybox both offer round up features to help you grow your nest eggs by saving your change – for example your £2.80 tube journey becomes £3, with 20p going into savings.

“Going a stage further, apps like Chip and Plum will actually analyse your bank account and automatically move money into a savings account for you.”

Go old-school

Jamie Smith-Thompson, managing director at pension specialist Portafina, suggests taking an old-fashioned jam jar approach can help anyone who really struggles to save.

“The three pots saving approach is fairly well established,” she says. “An account for treats and the things you know are coming up, such as birthdays and trips away. An emergency fund to cover life’s unexpected trials. And a bigger rainy-day pot, such as your pension. It can help to take this approach to the next level, with several pots around the house for loose change and the odd note or two.

“While keeping large sums of money in the house is not the wisest move, lots of little cash pots are much less of a risk and can help you to build up a surprising sum, often without really noticing.

“Empty your pots twice a year and you could be making last-minute plans for nights out, a trip away or contributing to your bigger savings funds.”

Double down when you’re in the money

Matt Ford, product director at Tandem Bank, has a suggestion for when costs hit and don’t hurt because you’re feeling flush: “Next time you’re hit by an annoying one-off cost that you can afford, why not double down and put the same amount in savings for next time? This will help keep you out of the red if you don’t have as much spare cash next time.”

Swap some treats for savings

We know that everyone under the age of 45 is sick of being told they’d have loads of money if only they stopped buying coffees or avocados.

This article is not going to enthusiastically tell you that if you save £2.50 on a daily coffee you could be a millionaire in just 1,096 years (go on, check our maths).

The truth is that setting a budget, with a fixed amount for discretionary spending is the only way to ensure that such unnoticeable expenses don’t sink your finances.

Making a budget is a brilliant way to fit savings into your finances and the Money Advice Service has useful tools to help, including a budget planner and a savings calculator.

But if you occasionally choose to swap a pricey treat for a quick injection into your savings, you can add a few tenners here and there into your savings pot – and it soon adds up.

New research from Barclays shows that making small “swaprifices”, such as replacing every fifth takeaway, shop-bought coffee and night out with free alternatives or having a night in, could save millennials up to a hefty £662.54 a year, on average.

Clare Francis, director of savings and investments at the bank, says: “Think swap, not sacrifice. That could mean making yourself a coffee in the office once a week, or inviting friends over every now and then instead of going out. The beauty of these small swaps is that by simply tweaking your lifestyle, the savings you make can be huge.”

Once you have a few hundred saved for those drizzly days then you have some security and more experience building up that pot.

That’s a good starting point for working on more ambitious savings goals and having an emergency fund that could help you sail calmly through any storm.