Jeanette A. Tucker | 2/8/2008 2:19:33 AM
One of the most powerful ways to increase your financial security and grow wealth over time is to develop a savings habit. Form that habit by “paying yourself first” and saving regularly.
“In other words, treat savings like an important ‘bill’ that has to be paid,” says LSU AgCenter family economist Dr. Jeanette Tucker.
The week of Feb. 24 to March 2 has been designated as America Saves Week and will be marked with events promoting savings for both children and adults.
“It is more important today than ever that Americans adopt this simple idea,” Tucker says, pointing out that the U.S. savings rate is the lowest since the Great Depression. In addition, household debt levels and foreclosure and bankruptcy filing rates are high while housing values have declined in many areas of the country.
All of these factors signal the need for saving. But what are some specific reasons why someone should put money away? The family economist recommends saving to purchase “big ticket” items, to pay for high-cost goals (a home, a college education, a car), to retire comfortably, to accumulate money to invest, to have security and peace of mind and to build an emergency fund.
“Let’s talk some more about the emergency fund,” Tucker says. “You may think you can’t afford to have one, but you really can’t afford to be without one. Why? Stuff happens! And most of the time, it costs money!”
By setting up an emergency fund, you protect yourself from the unknowns. Think of this fund as your “safety net” just in case something happens (you lose your job, your car breaks down, you break your arm, etc.). 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.
How much savings is enough for an emergency fund? 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, but 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.
How do you get started? 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 into savings. You could also try saving a small amount each week and making deposits into your savings account.
“The most important move is to start now,” Tucker emphasizes. “If you are saving already, try increasing the amount you save. The results, over time, will be amazing.”
To learn more about the benefits of saving, the family economist recommends visiting 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. For more information about America Saves Week, visit www.americasaves.org/national/saves_week.asp.
For related family economics and consumer topics, click on the Family and Home link on the LSU AgCenter homepage at www.lsuagcenter.com. For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.
On the Internet: LSU AgCenter: www.lsuagcenter.com
On the Internet: America saves: www.AmericaSaves.org.
On the Internet: America Saves Week: www.americasaves.org/national/saves_week.asp.
Contact: Jeanette Tucker (225) 578-5398 or Jtucker@agcenter.lsu.edu.
Editor: Mark Claesgens (225) 578-2939 or firstname.lastname@example.org.