It’s Called Currency

Actually, it’s not rain that you need to be saving for. It’s the tire punctured by a nail in the road construction you drive through every day. Or the emergency trip to the vet for your pet. Or the plumber to fix the backed up toilet. Or the new prescription that might actually work but doesn’t have a generic option. Or… fill in the blank.

We as a nation do not save money. Period. Not for rain, nor for true emergencies in our lives. In the past couple of years, we’ve actually had a negative savings rate as a country, meaning that we simply live beyond our means. We spend all that we bring in and then go into debt to spend even more.

What we do as individuals can be quite different than what the national averages show. And if you start today, and tell your friends and family about it tomorrow, we can collectively change those numbers which will change the net worth of our nation and help us all to have a stronger financial future.

There are lots of viewpoints about how much you should save. To start with, I like Dave Ramsey’s “baby emergency fund” of $1,000. Having $1,000 put aside to deal with emergencies can give you tremendous peace of mind in addition to giving you the funds on hand to cover many of life’s minor disasters. And what’s interesting is that with a thousand-dollar savings account, you will find that a hundred-dollar emergency is no longer a stressor. You just pay the bill and go on. No sweat. Then you replenish the savings account as you can and life is good.

For life’s major disasters, you should probably have between three and six months of expenses tucked into savings. If you’re likely to lose your job (and the likelihood of that has risen significantly of late), you will probably want more than six months of expenses.

The easiest way to start building savings is to have it automatically deposited or moved into a savings account on a regular schedule. Choose the amount you can afford, set it and forget it. It will add up quickly and you’ll probably never miss it.

Savings accounts are not a source of income, so don’t worry about the minuscule interest rates. Instead, make sure that you have quick access to the money. Accounts that offer debit cards or are tied to your checking account are some of the best options, but DON’T carry the card around with you. These funds are for true emergencies, not for you to dip into whenever you’re short on pizza money.

Also consider structuring your budget so that you set aside the money you earn this month to pay the bills next month. This breaks the paycheck-to-paycheck cycle and gives you a nice cushion in your checking account should something come up this month. Check out YouNeedABudget.com for more information as well as spreadsheets and software that really works with this principle.

Having adequate money in savings is a tremendous stress reducer. It’s not quite as good as a massage, but it’ll make the effects of the massage last longer.

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