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Independent

Rapid rise in easy-to-access rainy day funds

A RAINY day fund should contain anywhere between a month to six months' salary depending on your line of work.

This reserve can help you cover your monthly expenses should you ever find yourself in that unfortunate limbo of being "in between" jobs.

A rainy day fund is also a good idea for those who have large mortgages -- but on the cheap tracker rates.

With interest rates likely to rise in the not-too-distant future, a rainy day fund could help cover higher mortgage and insurance costs in the months and years ahead.

A key feature of any rainy day account should be easy access to your money in case of emergency.

According to price comparison website Bonkers.ie, the amount of money in notice accounts has gone up steadily every month for the last year, from €12.3bn in May 2009 to €17.2bn in May this year -- an increase of €4.9bn.

By contrast, the amount of money in term accounts has fallen by an almost identical amount over the same period -- €4.9bn.

"I think we can conclude here that people are simply not prepared to lock their money away for long periods of time any more, and when term accounts are maturing, people are not rolling them over into another term, they are putting their money where they can get at it at short notice," says communications director Simon Moynihan.

While regular saver accounts are the obvious choice, another easily accessible alternative is An Post savings bonds.

"Post office bonds are fabulous," says Karl Deeter of Irish Mortgage Brokers.

"Ten per cent with no tax after three years, that gives a tax equivalent yield of over 4pc which is hard to find these days and you can invest up to €120k in it."

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