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What's the best way to stash away a rainy day fund?

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Behavioral science can be used to encourage and reinforce positive behavior. You might not even realize but it's being used by businesses and financial institutions to nudge you to take actions. For example, saving for retirement (read more...). Automatic enrollment in a 401(k) is an example of how people can be subtly pushed toward saving more for retirement. 

 

Have you used any specific tools or apps to help save for rainy day? (Out of sight, out of mind, perhaps?) Post your savings advice and hear from others!

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Re: What's the best way to stash away a rainy day fund?

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To me, it's always as you stated: Out of sight, out of mind.

  To do that, set up an automatic transfer of money from your checking (or whatever account  your paycheck goes to) that transfers money to another account, timed to your paycheck dates. Of course, you have to quell the urge to take away from that other account.

 


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Re: What's the best way to stash away a rainy day fund?

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Managing money is one of my weaknesses.  If it's in my account, I want to spend it.   So I have long squirreled a certain percentage away in an account that's not easy to touch.  When a certain amount builds up, I put it in a CD, so that there is a penalty to pay if I cash it in too early.   I do it for everything.   Retirement, emergency savings, college savings, vacation savings.   It's all deducted automatically from my paycheck and put elsewhere.  

 

As someone who didn't come by saving naturally, I started out small -- like 5% of my paycheck, and worked my way up as my income increased.   It was less painful that way.



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"...As someone who didn't come by saving naturally, I started out small -- like 5% of my paycheck, and worked my way up as my income increased.   It was less painful that way....".

 

If you started early, then 'small' doesn't matter that much. That's the principle of wealth accumulation. Just $50 a month at 3% rate gets you about $50,000 after 40 years. Of course, if you're saving over a 40 year period, one should be investing, at the least, in index funds.


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Re: What's the best way to stash away a rainy day fund?

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retiredtraveler wrote:

"...As someone who didn't come by saving naturally, I started out small -- like 5% of my paycheck, and worked my way up as my income increased.   It was less painful that way....".

 

If you started early, then 'small' doesn't matter that much. That's the principle of wealth accumulation. Just $50 a month at 3% rate gets you about $50,000 after 40 years. Of course, if you're saving over a 40 year period, one should be investing, at the least, in index funds.


I did.   With my first "real" job at 20.   For retirement, at least.  And that's in mutual funds, one in an index fund.   But shorter-term savings, I tend to stick to savings accounts and CDs.  I know I shouldn't.   But I get very conservative.   The recession we just had completely wiped out my mother's retirement savings.  It was all in the stock market.  It has more than recovered now, but that's a scary thing.   Fortunately she didn't need any significant funds while her savings recovered.   But I obsess over the "what ifs"....

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The axiom “pay yourself first” comes to mind.

But I’d add along with that you’ve got to learn to budget. Because if you don’t have the self-discipline to keep within a budget any of that money you “paid yourself first” may have to pay for your over budget expenses and then there goes your rainy day funds. 

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Re: What's the best way to stash away a rainy day fund?

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These pushes from Wall Street to save are NOT for your benefit. They are simply cloaked manipulations to get you to put more money into accounts that wall street can manage and take fees.  WalI Street LOVES 401ks and systematic investing plans because they mean more money to manage every month and that means more fees. CHA-CHING (that's the sound of your money in their cash register!  I am a retired financial advisor so my comments are informed and not those of a conspiracy theorist.

 

I am always motivated to invest because I get a much higher return (with less risk) than what Wall Street offers. https://www.retirementincome.net/alternative-investments-for-retirement/

 

Wall Street must always promote their products (e.g. mutual funds, the #1 investment within 401ks) rather than something that could serve you better, but they do not sell and thus cannot make any fees/commissions. If you want to do something smart, start an automatic investment program with the Vanguard S&P 500 fund (fees are close to zero).

 

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"...These pushes from Wall Street to save are NOT for your benefit. They are simply cloaked manipulations to get you to put more money into accounts that wall street can manage and take fees. ...".

 

Yes. Wall Street benefits greatly. But you're leaving out the one piece that may apply to people. The company match.

   For myself, I got into investing in my 20's. The overall issue with investing, for the masses, is that so few people understand the basics. Alternative investments take more work, and scrutiny, to understand and to make informed choices.

 

"......Forty-two percent of investors don’t know how their assets are allocated in their portfolios, according to a recent Prudential Investments’ retirement preparedness survey of more than 1,500 Americans aged 21 and older......For most Americans, logging into their typical 401(k) screen is a lot like reading a foreign language or math formula,” said Greg Smith, president of blooom, a website that analyzes the way 401(k) accounts are allocated.'......

 

I've read so many stats about people and financial accuity (lack thereof). 2/3'rd's of the population doesn't understand compounding. More than half can't balance a checkbook. Only half the population invests at all. Only 20% know about the inverse relationship of interest rates to bond prices. Even among investors, almost half don't have a good grasp of differences between stocks and bonds.

 

 


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Re: What's the best way to stash away a rainy day fund?

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Message 9 of 29

AARPLynne wrote:

Behavioral science can be used to encourage and reinforce positive behavior. You might not even realize but it's being used by businesses and financial institutions to nudge you to take actions. For example, saving for retirement (read more...). Automatic enrollment in a 401(k) is an example of how people can be subtly pushed toward saving more for retirement. 

 

Have you used any specific tools or apps to help save for rainy day? (Out of sight, out of mind, perhaps?) Post your savings advice and hear from others!


Actually no, I enjoy watching my numbers and being able to move money to savings.  I work in finance and I think that people need to learn alot more about handling their money.  I think it is one of the least understood areas that people control.  Even many small business owners lack basic skills.   

 

 

Life's a Journey, not a Destination" Aerosmith
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Re: What's the best way to stash away a rainy day fund?

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"....Actually no, I enjoy watching my numbers and being able to move money to savings.  I work in finance and I think that people need to learn alot more about handling their money......".

 

Yeah. We 'numbers people' like looking at this stuff. The OP and your comments can be summarized simply as: if you can't educate the masses on finances, use some 'trick' psychology to get them saving.

 

   I've never understood the disinterest in handling one's finances. It really, totally, eludes me.  


Just think. The world was built by the lowest bidder.
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