Top 10 reasons why everyone needs a rainy day fund

Emergency funds seem to be having a moment, especially during Money Month 2025. Around the world, we’re seeing more and more initiatives aimed at helping people set aside money for the unexpected. This makes a lot of sense.

If you’re just starting to save up a cash cushion for emergencies, know that there are so many benefits to building a buffer. Some of these may surprise you, though, since they’re a lot more about mindset and habits than just having a few hundred dollars socked away for when the car blows a valve.

As a rule of thumb, Sorted typically recommends setting aside three months’ worth of expenses. Self-employed folks or those with uneven incomes may want to put away more. Learn more in our guide.

Here are the top 10 reasons why you benefit from having a cash cushion 

1. It frees up your headspace.

Everybody’s got limited mental bandwidth, and it gets loaded down when money is tight. Having funds set aside frees us up mentally to make better decisions. When it’s hard to make ends meet, not having any slack is the equivalent of trying to function effectively without a night’s sleep.

2. It helps you weather the storms.

Emergencies will happen, so we need to expect the unexpected. Rainy day funds give us the resilience we need when the storms hit. They’re really a form of self-insurance, where we take on some risks ourselves instead of paying a company to do so.

3. It keeps you from crisis borrowing.

Payday lenders don’t exactly charge mates rates. They may seem like the only option in a crunch, but if you crunch the numbers, we’re the ones getting squeezed.

4. It lowers your anxiety.

Concerns about what could go wrong, especially about the money we might need in an emergency, typically drive anxiety levels up. A cash cushion gives us less to worry about.

5. It helps your budget breathe.

Trying to stretch a household budget too thin is a recipe for difficulty, so budgets need to breathe. Having an emergency fund to fall back on lets the budget, and us by extension, breathe easier.

6. It keeps you on track towards your goals.

There’s no point in setting goals if the first unforeseen cost is going to wipe out our progress, right?

7. It allows you to pick the habit.

We slip into so many of our habits unawares. Deciding to build a buffer means we’ve chosen one that’s worth sticking with for life: saving.

8. It builds your technique.

Saving takes proven methods like making it automatic and paying ourselves first, and those will come in handy as we’re working towards our other life goals.

9. It’s your gateway to investing.

The act of building a buffer shows us how to make a surplus, which is absolutely necessary for investment, too. It’s an on-ramp.

10. It shows you how much you can achieve over time.

Once we see that we’re in charge and can flow our money where we want to – and not just where the sales folks want – we’re empowered. Just seeing how our regular savings add up and compound gives us more confidence in what’s possible.

It can help to build your emergency fund yourself, or with whānau

Many of us tackle emergencies and rainy day funds collectively – setting aside money together as whānau, friends or community – which can be a powerful way to handle unexpected events. But some time ago, I realised that a cash cushion may not be something that anyone else can give you. (Well they can, but you may not be able to hold on to it.)

My parents once pitched in a couple of thousand so I’d have something in case of emergency. Unfortunately, it soon slipped through my fingers because I didn’t change any of my faulty habits with money to be able to keep it. This taught me how effective automated saving is, so my fund would definitely be ready for that rainy day. 

It can help to build your emergency fund yourself, and perhaps that’s one of the best benefits of all: achieving something worthwhile and getting ahead.

Ready to start? Our savings calculator can show you how quickly yours can pile up.