Sanchit lived from pay cheque to pay cheque till crisis struck and he had to be hospitalized for an emergency surgery. There were expensive medicines to be bought, besides the cost of hospitalization and surgery, and other sundry expenses. Till the medical insurance claim came through he had to borrow from friends and family. In spite of his reasonably fat pay-cheque, he had no savings in the bank for such a situation. Sanchit is much wiser ever since and has been saving regularly to build a cushion in the bank for such a situation.

Here are some reasons to save for a rainy day:

1. To Build an Emergency Fund.

It is extremely important to have an emergency fund set aside to cover unexpected expenses. This is to cater for any emergency like hospitalization, unexpected home or car repairs, sudden job loss etc. Ideally your emergency fund should have at least 3 to 5 months of your expenses.

2. For Retirement.

Distant though your retirement may seem, the sooner you start saving the less you will have to save in future. Besides building a pension fund, you may also get tax rebates on your savings.

3. To Simplify Your Finances.

Besides giving you a sense of security the other major reason to build that cushion in the bank is that it simplifies your finances. If your savings in the bank are big enough you can pay off your bills at the beginning of the month. Paying bills through out the month can be complicated and stressful. Paying them all at once is simpler, easier, and saves time.

4. For Education.

Many people return to college to earn their MBA or Masters or Doctorate degrees. If you have enough savings, taking a decision to continue education becomes easier. If you have children then saving for your child's education is a decision you will never regret.

5. For Vacations and Other Luxury Items.

A very good reason to save is to have fun. You can save up for your tour of Europe or that luxury cruise. Or you could save for that expensive home theatre you have been wanting to buy. When you pay from your savings you will not be paying for your trip to Europe for the next five years and you will be amazed at how much money is available in your budget if you do not always have to pay off some loan.

Having understood the importance of building a cushion in the bank, the next question is how does one save, especially if you have never saved before. Here are some tips to set you on the path of building savings in your bank account.

i. Pay Yourself First.

Deposit savings into an account as soon as you get paid. Saving should be your first priority. If you think you will save whatever is left over at the end of the month you will never be able to save any thing. An easy effective way to start saving is to simply deposit 10% of every salary cheque in a savings account. If you get a salary of say Rs. 40,000 move the decimal one place to the left and deposit that amount- Rs. 4000. This works well and over a few years you have a tidy sum in savings.

ii. Cut Expenses and Budget.

If you are having a hard time saving you will need to create a budget or spending plan. With a budget it is easier to see what expenses you can cut, what is necessary, and how to put a little extra aside for the savings.

iii. Create an Emergency Fund and then a Cushion.

Once you have saved an emergency fund of about Rs. 50,000 (the minimum) then redirect the savings for a cushion in your account.

iv. Be Patient and Persevering.

Even if you can put Rs 1000 per month or more to begin with, saving may not seem so difficult after all and you may even start enjoying the feeling of seeing your bank balance grow. And when you have some savings, you will have fewer worries and greater security, and who doesn't need a safety net in today's uncertain world?