“Developing a ‘savings habit’ is the most powerful way to increase your financial security and grow wealth over time,” says Brenda Schmitt, ISU Extension Family Resource Management Field Specialist.
The simplest and most basic strategy is to “pay yourself first” and save a portion of your income on a regular basis. It is important to treat savings like an important “bill” that has to get paid.
The U.S. savings rate is the lowest it has been since the Great Depression. Household debt levels, foreclosures and bankruptcy filing rates are high and housing values have declined in many areas of the country. All of these factors support the need for savings. Savings can be used to buy “big ticket” items; pay for high cost goals such as a down payment on a home, college education or purchasing a car; retiring comfortably; accumulating money to invest; and for emergencies.
Emergency funds are for when “stuff happens”. By setting up an emergency fund, you protect yourself from the unknowns - lose your job, car breaks down, a broken arm. Without this reserve, you may be tempted, or forced, to go into debt—debt that may take you years to pay off and cost you much more in the long run! Having an emergency fund gives you more options to handle life’s unexpected events.
Most financial experts recommend having three to six months living expenses set aside. The amount will depend on your personal situation (job security, income level, needs). Some of this money should be kept in liquid accounts, such as a money market fund, while other funds could be tapped from a low-interest source such as a home equity loan. Your emergency account should be easily accessible, just not too accessible! Financial institutions offer a variety of savings accounts, such as passbook savings, money market funds, and short-term CDs, which work well for emergency savings. One of the easiest ways is to make your savings automatic. Check with your employer and bank or credit union about direct deposits or transfers from checking to savings. You could also try saving a small amount each week and make deposits into your savings account.
The most important thing is to get started now. If you are already saving, try increasing the amount that you save. The results, over time, will be amazing. For additional information about the benefits of saving, visit the America Saves Web site at www.AmericaSaves.org. There, you can enroll as an American Saver at no cost and receive periodic motivational newsletters. The week of February 24 to March 2, 2008 has been designated as America Saves Week and will be marked with events promoting savings for both children and adults. For further information about America Saves Week, visit http://www.americasaves.org/national/saves_week.asp or call Brenda Schmitt with ISU Extension at 641-423-0844.
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1/29/2008