“How much should I have in savings?”

It’s not often that I read the magazines in the break room–partly because I could care less what’s going on with Brangelina or because I have no interest in making cupcakes look like butterflies. But I confess to opening the April 1, 2009 issue of Family Circle Magazine a few days ago and stumbling upon an article by Kate Ashford titled “Financial Planner.” The article was shorter (much shorter) than I expected, but there were some good bits of advice.

“Confused by the economy?” Ms. Ashford begins, then answers four (only four, mind you) finance-related questions. I’m not going to repeat them all–you can click the link to the article above if you want to read the entire piece. The third question and response is worth sharing here because I hear this question with some regularity when I’m in the bank, and when people I meet find out I work at a bank:

“Q. How much should I have in savings?

A} At least six months of living expenses. The general rule of thumb has always been that dual-income families should have three to six months of living expenses accessible in a savings account…But fewer than 40% of adults have enough in savings to tide them over for even three months, according to Bankrate.com. And now that the economy is so uncertain, experts are leaning toward six months. “If someone loses his job, it’s anybody’s guess how long it will take to become employed again,” says Donald E. Whalen, a certified financial planner in Alpharetta, Georgia. But don’t get overwhelmed by the thought of having to save so much money-”living expenses” doesn’t mean cash for leisure activities. It’s the money needed to cover bare essentials, like mortgage, food, and health insurance.”

To beef up your emergency fund:

A) Set up a weekly automatic debit from your checking account into a high-interest savings account, and increase the amount when you can.

B) Raise the deductibles on your home and auto insurance, or shop around for a better deal, and then stow the difference in a savings account.

C) When you finish paying off a credit card, keep making payments-to your emergency fund.

D) Try bundling expenses (like getting phone, Internet and cable from one company) then stash the savings.”

These are great ideas, and the emphasis is clear: Look for places to cut expenses and then save the money rather than spend it. For more ideas on how to save money, check out some of our past posts.

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