Savings. It comes in all shapes and sizes. Retirement Savings. Vacation Savings. College Savings. New Car Savings. Sexy summer wardrobe savings. New home savings… see a pattern yet? Chances are that no matter what milestone you’re reaching in life – be it big or small, you’re going to need some cash on hand to either A) get you there or to B) choc over once you arrive.

Now before I go into my spiel on the who, what, where, when and whys of savings, let me put on my “financial planner” cap (it’s pink, of course) and start out by saying that EVERYONE – guys, girls, grandmas, your hot next door neighbor, your boss, 20somethings to 90somethings- everyone, needs an “Emergency Fund.” And no, a sale at Macy’s does not constitute an emergency, ladies. Neither does a date with that hot next door neighbor of yours. Well, it’s not a “financial” emergency, anyways.  

So what is an emergency fund, exactly? It’s anywhere from 3 – 6 months of your current income set aside in a cash/savings account for – well, emergencies. Be it a car accident, job loss, or a break up and loss of rent, the funds in this account are meant to cover you and get you back on your feet. So….This is the point where you roll your eyes and laugh at the idea of even having 2 months worth of income saved, right? I understand. And trust me – I know that if there is money being saved, it’s probably not for emergencies. It’s likely for a “big ticket” item you’ve been lusting after. No pressure. And no need to feel guilty. This is only to educate and inform you of some ways to get yourself into a better position (financially) then you may be in now. If you’ve got an emergency fund already, great! If not, it’s something to think about and consider trying to build up.

Now, on to main event.  First, it’s my belief that everyone should have a savings account and keep it separate from checking and emergency fund accounts. I shouldn’t have to explain why keeping your savings funds in your checking account and easily accessible is a bad idea. Even if you have nothing to save for and are happy living paycheck to paycheck, open the account. I’m willing to bet you’ll feel even happier after you start putting something in there.  You can open a savings account at any bank your heart desires. All I ask is that you:

•  Make sure there isn’t a monthly maintenance fee (they should just be happy you’re depositing your money with them) and
• Get the best interest rate you can. Use your powers of persuasion, the fact that you’re a long time customer or your great credit history if need be.

Remember, it never hurts to ask for something.  Also, keep in mind that banks like Bank of America have a Keep the Change program where they’ll round up every purchase you make with your debit card to the next dollar and deposit the difference into your savings account. You’ll end up saving without even trying!

As far as how much you should be saving – really, it’s different strokes for different folks here, ladies. I would provide you with the generic: you should aim to save 10% of your monthly income (before taxes), but I know that may come as a shocker to some of you.  In the financial planning world, I’d really say shoot for 15% and you’re golden. 10% is nothing to freak out about and is easily attainable.  Keep in mind that nobody expects you to start chucking your money into an interest bearing account starting tomorrow. Your goals should first be to get yourself out of debt. The reality is if you’re trying to pay off a credit card with a 12% APR while simultaneously stashing cash in a savings account earning 1%, the math alone will show that you’re better off putting your funds towards paying down credit balances and saving yourself the extra interest charges. 

On the other hand, I am a huge believer in giving yourself peace of mind, so if you’re like me and like seeing that you have something in your savings, no matter how small – think about putting $20 a paycheck into a savings account while you’re paying down debt.  Or if you have the extra funds on hand, make sure to pay down a decent chunk of debt and then put the extra towards savings. An example would be if you have a balance of $900 on your credit card, a minimum payment due of $30 and extra cash after budgeting for Absolute Musts & Fun Times (See prior post on the Young & the Budgetless) of $250 for the month. Putting $200 towards your credit card and $50 in a savings may not be the right way to stretch your dollars, but if it can bring you a sense of accomplishment in that you’ve paid off 22% of your debt and started a savings account, then go for it! That happiness and goal attaining is what will keep you on track.

If you’re at the point where you can only afford to pay the minimum balance due on your cards, don’t fret! This isn’t a race. Now is the time for you to sit down and evaluate your finances. Find out where you’re over spending, what you can cut, what you can consolidate and what payments you can negotiate down. Make some phone calls and do some research. Did you know you can lower your car insurance by increasing your deductible by just a few hundred dollars? If you have a few credit cards, consider consolidating the balances to the card with the lowest APR. You’ll cut your interest payments and only have one monthly bill.

The fact of the matter is that you and only you know your situation. You know your bills, your extras, what you can afford to save and can’t. 10% is a nice goal to aim for, but if you can’t make it just yet, try starting with 5%. It may take a slight adjustment and some extra attention and effort on your part, but once you start saving, chances are you won’t want to stop! Set up goals for yourself. Be it dollar amounts, percentages, items to save for or more. Focus on getting yourself on a budget and savings program and sticking to it. Set up mini-rewards for thresholds met. If you save $500, invite your friends over for a celebratory drink. Once you get yourself into a routine, you’ll enjoy watching your money grow and you’ll be surprised at just how fast it does!