The State of American Saving - Savings "Buckets"

Posted by Jeremy Wascak April 12, 2017

Categorizing Your Saving
Savings "Bucket" #1 - The Emergency Fund

Saving is one of those things that can be both simple and complicated.

What's simple about it? Well, saving simply means spending less than you make, and putting the extra somewhere for future use.

This is, as one of my financial mentors, Dave Ramsey, puts it, "a sign of maturity." Delaying gratification of the use of that money now, with the understanding that you will need it and it will benefit you much more later.

Once you actually start saving though, it becomes a bit more complicated. Where should I put the money? There are savings accounts, certificates of deposit, retirement accounts, the stock market, gold and silver, the list goes on.

While you should always seek the advice of duly licensed financial advisors, and the following is opinion only and should in no way be construed as financial, insurance, or tax advice, here are some basics:

The Emergency Fund - this comes first. Dave Ramsey calls it "baby step one." You need to put money into a "liquid" account for a rainy day. By "liquid," I mean easily accessible and withdrawal without penalty. This is where your basic savings account comes in. For security reasons, I would not use a checking account here. It is easier for someone to commit fraud with your checking account than a savings due to more ways to access the funds. You are not going to earn a great return on this account, and that's okay, because that's not the point of this. This is your insurance policy against life. This is what you use to avoid dipping into your retirement savings or any other type of savings you may have. How much does this account need to be? At least three times your monthly expenditures, preferably six months.

Jeremy WascakTomorrow: Savings "Buckets" Part 2

Jeremy Wascak