 SECURE YOUR FINANCIAL FUTURE! INVEST IN YOU!
Welcome back to Money 101, Invest in You: Ready. Set. Grow's eight-session guide to financial wellness.
You are on your way! Last week, you tackled your first challenge on budgeting. Today, we move on to creating an emergency savings.
Remember, this journey is designed to teach you to manage, grow and protect your money. An important part of that is making sure you have enough cash set aside in case of an emergency. Many Americans don't. According to a survey by PNC Financial Services, more than a third of the respondents, ages 36 to 60, said they had nothing saved for an emergency.
The last thing you want is to be hit with unexpected car repairs or medical bills and no way to pay for them, other than credit.
By following the challenge below, you'll learn how much you should have in an emergency fund, how to build it up and where to keep it.
Thanks again for joining me — and happy learning!
Sharon
CHALLENGE #2: CREATE AN EMERGENCY FUND
How much do you need? The size of your emergency savings is dependent on your monthly expenses and whether you are married or have kids.
Three months of living expenses may work for someone without children or if you have short- and long-term disability through your job, which pays a portion of your salary if you are laid up. However, if you think you'll have a hard time finding a new job if you are laid off, are caring for elderly parents or if you have kids, you should try to save at least six months' worth of expenses.
To determine the amount needed, look at your budget and add up the cost of necessities, as well as any debt you have to repay. Multiply your expenses by the number of months you want the emergency fund to cover.
10 ways to save
"Do not save what is left after spending; instead, spend what is left after saving." — Warren Buffett
Where to keep your money Your emergency fund should be in a safe investment that you are able to access quickly. Your money should also be making money.
One option is choosing among internet banks, which typically give you a higher interest rate than traditional savings banks. While you can't withdraw funds from an ATM, you can transfer money directly into your checking account.
You can also look into money market bank accounts, certificates of deposit (CDs) and Roth IRAs.
The bottom line Two down, six more to go. Congratulations! You are one step closer to achieving financial wellness.
Next week, be on the lookout for our next challenge: saving for retirement.
We look forward to continuing to help you — Invest in You!
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