You may have had a well-meaning financial advisor (or parent) at some point in your life tell you that you should strive to have a six-month financial safety net set aside. Of course, that’s a goal that can seem far too lofty for anyone living paycheck to paycheck or struggling to put away even $1,000 for an immediate emergency.
Could you get by without a consistent paycheck from the breadwinner in your household? Layoffs, illnesses, and injuries can waylay even the most balanced of budgets without planning for unexpected personal tragedies like these.
What you should do before you start saving
Before you get started saving, a few house cleaning items will help make it easier including: sock away around a $1,000 for those annoying unexpected expenses that are problematic, but not necessarily tragic; eliminate all of your high-risk debt (think credit cards and higher interest personal loans); and are start making auto deposits into a retirement fund at a pace that conservatively estimates meeting your retirement goals. Tackling these items first will set you on a smoother sail to start saving regularly. These are the first steps in a solid savings plan.
Now you’re ready to save…where do you put your money?
Should you open another cash savings account for that six-month safety net? Some experts say no. While having cash quickly available for an emergency makes a more traditional savings account the best bet, many financial experts suggest investing your safety net funds in a money market account to help gain enough interest for it keep up with inflation, which is currently at a relatively low 1.7 percent1.
Savings accounts have an average rate of return that hovers around 2 percent… not such a big deal for smaller amounts, but for a larger pool of funds, that can leave a depressingly large amount of cash on the table when you think about how long these funds will (hopefully) be sitting unneeded and could be enjoying the magic of compound interest. Standard Bank’s money market accounts could provide the flexibility you need to make withdrawals quickly while reaping the benefits of higher interest yields, particularly as your balance rises.
Be patient, saving takes time (but we’re here to help!).
Solid financial safety nets take a long time to weave together, but they can also bring unparalleled peace of mind. It takes time, patience, and perseverance to achieve this goal. Knowing how to set up a system to create a safety net that meets your personal financial needs can be daunting. That’s why our financial experts can help you set up a system to get you to that golden standard of financial safety.
Don’t worry about how much time you’ve ‘lost’ by not saving sooner. The best time to start is today! We’ll work with you to find a solution to meet your goals that fits your current situation, we can even set up a system that passively invests for you so there’s nothing extra you need to do each month. Visit your local office and learn how to weave YOUR financial safety net while also supporting the local economy with a community bank!