ICFE eNEWS #15-04 - January 29th 2015
Seven Considerations For Maintaining An Emergency Savings Account
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of
Most Americans struggle with the possibility of maintaining an emergency
savings account. If you are one of those that struggle, these seven
considerations may be of help to you.
Need. Most people think it would be nice to have a savings
account, but do not see it as a genuine need. We are used to using
our credit cards each time there is a special need or crisis and
taking months or years to pay off the debt we incurred. If we knew
for sure that in the next month we would have a flat tire, wouldn't
we make sure to have a spare in the trunk? In similar manner, since
we know that sooner or later we will all experience unexpected financial
emergencies, the best preparation is setting money aside for that
Consider The Timing. The average
person will try to save from the amount he has "left over” at the
end of the month, but for most of us, there is not extra money left
over. So, we must tell our money where it is going to go before
it is all gone, by "paying our self first." That means we view our
savings contribution as a "have to bill" and deduct it from the
whole right at first.
Consider The Amount.
Many people try to save too much too quickly, fail, get discouraged,
and quit! So, before we decide on an amount to save, we should jot
down our normal monthly expenses to see what amount we can realistically
contribute from each check. In some cases, we may have to make minor
cuts in our spending in order to free up money to put aside for
When we decide on a realistic amount to contribute,
set a goal of $500 in savings and calculate how many months it will
take to reach that goal. Then shoot for $1000 goal, then $2000.
Many experts say that we should shoot for an eventual goal of three
months salary in our savings account.
Method. The best method is to have our savings contributions
taken directly out of our check and deposited into a savings account.
What we don't see, we don't spend. This allows us to save consistently
without requiring as much self discipline. An additional possibility
would be to increase your deducted savings designation by the amount
of your recent raise, thus building up savings even more rapidly.
Consider The Location. I think it is best to
have our savings account in a location where it is not so accessible,
maybe even in a different bank or credit union than the one we use
for checking. If it is an inconvenience to get money from our savings
account, it might stay in there a bit longer.
The Drainage. Many people have told me that just when they
are getting their savings account built up, something happens to
drain it. Don't let this discourage you. At least the money was
there this time and you did not have to borrow to meet the need.
It would be nice if the need did not drain all the money, but if
it does, it does. Just keep on doing the right thing, and it will
get built back up.
Consider The Purpose.
I am very aware that the interest gained on a savings account is
minimal, but the purpose of the savings account is not investment,
it is protection! We need to have available monies to cover emergencies
so we do not have to go into debt when they come.
really want to have a savings account, we will make it happen. The
action seems to follow our attitude. Maybe these considerations
will motivate you to decide that now is the time to begin - before
the next emergency comes!
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023