If you are able to you should be putting aside money into savings. You should ideally be putting 60% of your total savings into a long-term savings account. This is used for your long-term goals like retirement.

In the book, Money: What Financial “Experts” Will Never Tell You, it talks about the prediction that in 2015, 77 million Americans will be over the age of 50 and only about 1/3 of those people will be financially secure enough to retire. That means 50 million of these individuals will not be able to retire. Have you started saving for your future, yet?

To be successful at saving for future goals it is important to make sure that the money is not easily accessible, this will cut down the temptation to pull money from this savings account and spend it. It would be a good idea to put money in an account like a 401(k) or Roth IRA.

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Building on the last two posts (found here and here), todays blog post is about emergency savings. It is important to set aside a percentage of your savings each month, ideally you should put aside 20% of your total savings toward your emergency fund. An emergency can have lasting damaging effects on you financially if you are caught unprepared. 

Emergency saving funds are very important, you never know what life will throw at you so it helps to be prepared. Any number of things can happen from illness, divorce, loss of job, or a car accident so it is important to be financially ready for it. In the book Money: What Financial “Experts” Will Never Tell You, the authors suggest thinking about this emergency savings as self insurance. You insure your car and your house so you should have emergency savings set aside for insurance when something unexpected happens.

It is suggested that you have 3-6 months of income set aside and if you can it is ideal to set aside one year of net income. This is you backup so that if something does happen you can weather it and continue to build your long-term savings. Without an emergency savings many people will use their retirement accounts to pay for unexpected emergencies and this can derail you from your long-term goals.

Be sure to visit learnkey.com/financiallitmonth for your free Financial Literacy white papers and other resources, and you can also Like Us on Facebook and Follow Us on Twitter for more daily Financial Literacy tips.

If you haven’t already, read our previous post Paying Yourself First

So now that we are all saving 10% of our income each month we need to break it down into three categories. You should put aside 20% of your savings each month into an emergency savings fund. An additional 20% should be put into an account for emotional spending and 60% should go toward your long-term savings goals.

Continue reading “Divide Your Savings Into Three Categories – Financial Literacy Saving Series”

Pay Yourself First, I like the sound of that, but apparently in America we find this hard to do. Now, when I say “pay yourself first” I don’t mean go out and buy anything you want and then worry about paying your bills. I mean pay your savings accounts first before you pay your bills. The logic is that if you put your money into savings first you will actually put money in savings.

Continue reading “Pay Yourself First – Financial Literacy Saving Series”