Savings Basics

Having money in savings helps to build financial security. Without money set aside for the future, it will be difficult to meet emergencies; pay large, infrequent bills; or build resources for important longer-term goals, like a car, a home, a college education, or retirement.

The golden rule of savings is to pay yourself first. By adding to your savings account on a regular basis, you will gain a sense of control over your financial life.

List your top three financial goals. Your financial goals provide a roadmap for the future.

First Stop: Emergency Savings

Life is unpredictable. And when it comes to money, it’s always a good idea to have an emergency supply of it! Most financial advisers recommend that we have emergency savings equivalent to three to six months’ worth of living expenses, however, some recommend a fund to cover eight months’ living expenses.

1. Start by doing the math. An emergency fund is intended to cover your basic living expenses should you experience a financial emergency, like losing your job or other source of income, or experiencing an unanticipated catastrophic expense —perhaps a medical expense or a major household expense.
   
   
2. Once you know that monthly figure, multiply it by three or six or eight, whatever you believe is the goal you want to achieve in establishing your emergency fund.
   
   
3. Decide how long it will take you to build up your emergency fund. ! Take your time, and be realistic about it.
   
   
4. Designate a special savings account as your Emergency Fund. Select an account that will accrue interest or earnings and one that offers liquidity so you can withdraw funds when an emergency occurs.

Second Stop: Set-Aside Accounts

Set-aside accounts are a place to put money that you know you will need in the future, instead of just keeping it in your primary checking account where using it for other purposes is too easy.