It struck me when considering the statistical probabilities of actually needing my rainy day fund that it’s much more rewarding to think of my savings account as a holiday fund. If, per chance, I make it through the next two years without an unforeseen, uninsured event, the equivalent of the heavens opening and pouring down on me from a great height, I could treat myself to that tempting, but extravagant, river cruise I have my eye on.
The truth is I have a direct debit that whips a portion of my salary away into my savings account each month. I have gotten used to managing on the residual balance in my current account and so the savings have accumulated over the years and continue to grow, because I continue to save. However, the interest rate I get is tiresomely low and by the time they stop the tax, my savings have gone backward in spending power. The cost of living has increased by more than the interest I received.
So I have justified spending my rainy day fund on a river cruise and I already feel more excited about life and committed to my savings, but isn’t this irresponsible? What about the “what ifs”?
Having reached the grand age of fifty, I am pleased to say the children are independent, my nest is not only empty but in better shape than it’s been in for a decade. A sizeable portion of my disposable income is being saved for retirement and the major risk to my financial security is that my health prevents me from working on to my planned retirement age.
My financial security is in part provided by insurance. If I am unable to work due to illness I have a plan that replaces some of my earnings and my regular premiums to pension. My mortgage is covered by critical illness insurance so if I had a health crisis I could clear my debt.
I find it hard to get excited about these insurance policies, but now I realise the reason I can consider my savings as a holiday fund is because this insurance underpins my financial security. In actual fact, I figure I have a responsibility to fund R&R to maximise chances of staying happy and healthy. Now where is that travel brochure?