Eat, Save, and Be Healthy

Many families have faced challenges with loss of income and/or extra expenses during this recession. Families are often called upon to help pay bills or provide necessities if they are not covering their own emergencies. So, the message about having a reserve fund of cash may not be a “hard sell” in these times. Coming up with the recommended 3-6 months’ worth of expenses can be challenging, however. That’s why financial advisers suggest that short-term savings should be built into the family’s regular budget, so that it can slowly build to a sum that could cover a medium-sized shock.

Whether you aim for the low end of 3 months or a higher amount will depend partly on accumulated income, job stability, health insurance coverage, sick leave and vacation benefits, and the calculated risk of break-down of the family’s equipment and systems such as vehicles, appliances, heating and air-conditioning, etc.

Setting aside some money regularly is an important habit and will provide the needed pool of money. Where will you put these savings? Because you may need to have access quickly, you should put in a “liquid” account — which means you can get it quickly without loss of value. Some choices are bank or credit union savings accounts, money market funds and short-term Certificates of Deposit (CDs). While these accounts earn very little, emergency funds should be set aside from your checking account so they are not readily available for spending on day-to-day items and will be there when needed. Talk with your family about what makes something an emergency that warrants spending from the account.

Even when you think that money is very tight, setting aside even a small amount may keep you from going into debt to cover an unexpected expense.

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