Are You Saving for the Unexpected

                               

Do you have an emergency fund? If your answer is no, why not? Many Americans today still don't have a savings account or an emergency fund. I heard on the news on recently that some Americans still spend all the money they have. One cause of this is instant gratification. We want everything right now instead of delaying gratification to save up to purchase an item. Nothing remains the same so it's best to be prepared for lean times than to get caught off guard.

Your emergency fund is a savings account that is used as your safety net – to help you in case you get sick or lose your job. You can use your emergency fund to hold you for a few months until you can find a new job or to help you through a financial crisis. Your emergency fund account should be separate from you’re your other accounts and should only be used for emergencies such as an unexpected expense, unemployment, etc. 

Your emergency fund money should be easily accessible and stored in a checking or savings account, preferably a high interest savings account such as Emigrant Direct, HSBC or ING or in a money market account which allows you to make money while saving money.

An emergency fund savings account should have enough money to pay your bills for at least 9 to 12 months. To determine how much money is needed to pay 9 to 12 months worth of your bills do an inventory and write down all your bills and expenses and the monthly amount spent on each item. Calculate the total. Use this amount and multiple by 9 or 12 to determine the total amount you need to save in your emergency fund.   

I know what you are saying, I can't even save enough to pay my bills for one month, how on earth can I start an emergency fund!  Start small, even if you save $1.00 a day at least you are saving and continue to do this until you are able to contribute more to your savings account. 

Once you have saved enough money to pay one bill pat yourself on the back. Then keep saving until you have enough to pay three bills and so on.

Once you have reached your emergency fund goal then you should start developing some long-term goals such as planning for retirement.  A great site to learn about retirement planning is www.morningstar.com/Cover/Classroom.html. They provide a great tutorial to show you the basics of investing. The site also has other great resources on personal finance, the stock market and other financial topics.

According to the Bureau of Economic Analysis the current personal savings rate is just a little above 5.5%. This which means more Americans are paying down debt, planning for retirement and saving instead of spending.   

Don't wait - start your emergency fund today, it can save your financial life.

Why You Need to Save

                                                              

Are you saver? Don’t feel bad. Many Americans today don't have a savings account. According to the National Institute of Retirement Security 84% of Americans are falling short of "reasonable" retirement savings targets. According to a study by Bankrate one third of Americans have nothing saved for retirement.

Life is unexpected and anything can happen at any time so it is best to be prepared. This is why you should contribute to a savings account. Your savings account is your safety net in case you get sick, lose your job, a loved one dies or you need to pay for unexpected expenses.

You should have enough in your savings account to pay your bills and monthly expenses for at least 9 to 12 months. Money should be readily accessible and stored in a checking or savings account, preferably a high interest online  savings account such as Ally Bank, Emigrant Direct or ING or a money market account.

You can start by contributing small amounts until you are able to contribute more even if it is just $5 a week. Contribute on a regular basis. Once you are able to contribute more do so. Make several short-term goals.

Once you have reached your first goal start developing some long-term goals such as planning for retirement or paying for your children’s college education. A great site to learn about saving is americasaves.org.

A savings account will ensure that you are on the road to becoming financially secure. A savings account reduces your chances of getting into debt, provides peace of mind and provides financial security. You may not know what the future holds but if you prepare your finances now, it will ease the burden of what tomorrow holds. Here are 11 tips to help your start a savings account.

1. Reduce monthly spending by 30-50%.
2. Downgrade or downsize your lifestyle such as buying a smaller home or trading in your car for a cheaper car.
3. Save a minimum of 10% for every dollar earned or received.
4. Put change in a jar every 3 months and deposit the money into a savings account.
5. Use automatic deduction.
6. Use bank programs such as Wells Fargo Way 2 Save Program or Bank of America Keep the Change.
7. Determine what you need ahead of time and save money to pay for it instead of using credit cards or risky financial products such as Payday loans.
8. Shop around with various banks to find a checking account with no monthly fees.
9. Use direct deposit to send your paycheck directly to your bank.
10. If you get a raise, save most of the money received from the raise or use a portion of it to contribute to a savings account.
11. Use your tax refund to pay down debt, contribute to a savings account or retirement account.

 

How to Start a Savings Account

                                                                                    

People feel powerless and helpless when they don’t have a savings or retirement account, live paycheck to paycheck or experience a financial crisis. You feel more confident, in control and powerful when you have a savings and/or retirement account - when you don’t have to worry about how you will pay for car repairs or a broken furnace.

People who do not save feel a temporary sense of power when they buy something that they believe shows they are powerful such as a “BMW”, “going on vacation to a Caribbean island or buying a designer item such as Luis Vuitton. However, these feelings erode quickly when the bill arrives – the credit card bill and they go back to feeling powerless. They also experience these feelings because they are treated differently by society. Someone living paycheck to paycheck may go to a liquor store or checking cashing place to cash their paycheck. However, if that same person when to a bank to deposit their paycheck they would have a different experience emotionally.

Nothing last forever and nothing stays the same forever. Life happens and things are constantly changing. Possessing a savings account will help you deal with changes in life much easier than applying for a payday loan because you don’t have a savings account. 

Some benefits of having a savings account are:  overdraft protection, no checking cashing fees, compound interest, cash back rewards for some debit cards, you have more payment options, money available for unexpected expenses.

Set a savings goal, reward yourself when you reach a milestone, and read your statement monthly. Here are 7 easy ways to start saving:

1. Coins.  Save loose change in a jar. The money saved can be put in a high interest online savings account such as Emigrant Direct, ING Orange Account or HSBC.
2. Use automatic deductions. Sometimes it is easier for people to save money if they can't touch it or see it. Setup paycheck deductions or setup automatic transfers to your savings account.
3. Use programs. Use bank or community programs such as: Bank of America Keep the Change, Wells Fargo Way2Save, Individual Development Accounts (IDAs), etc.
4. Online. Open an online savings account that has a higher interest rate than a traditional savings account.
5. Location. Open an account at a bank location that is outside of your work area or local neighborhood to reduce temptation of accessing the account on a regular basis.
6. Separate.  Create several separate savings accounts:  an account for unexpected emergencies, a vacation account, an account to use for home repairs if needed.
7. Contribute regularly. Contributing regularly quickly builds up your account balance and helps you take advantage of compound interest.