It is a bit disconcerting that multiple sources have released studies confirming that many Americans are still not equipped with necessary savings, whether it’s for an emergency, retirement, or just a new iPad.
Saving for an emergency
Whether the amount is $1,000 or one year’s salary, everyone has their target savings number.
However, a survey performed by the National Bureau of Economic Research reported that only 24.9% of Americans could come up with $2,000 in 30 days, which according to the Bureau equals the amount one would need for an urgent car or home repair, or pay a large copayment on a medical or legal expense.
Bolstering this evidence, other data suggests that only 24 percent of Americans have long-term savings of enough money to last them six months in case of a financial emergency. An equal number do not have any emergency funds at all.
Saving for retirement
According to the 2011 Retirement Confidence Survey by the Employee Benefit Research Institute, 27 percent of workers reported that they are not at all confident that they will have enough money to pay for basic expenses during retirement. This is up from 22 percent the previous year and is the highest level measured in the 21 years that the RCS has performed this survey.
Additionally, 29 percent even reported they had less than $1,000 in savings, and over half claim that the total value of their portfolio is less than $25,000.
PBS had some numbers too: 22% of workers have no personal savings, 30% of workers have a zero balance in retirement savings, and 40% of workers aren’t currently saving for retirement at all.
Where to put your money
If you’re looking to build up your savings, you must first determine your timeframe and how much money you have to contribute to the fund. The properties of a CD account make it a great saving option because it locks up your funds, eliminating the possibility of spending. An Ally Bank 1-Year CD is currently earning a competitive rate of 1.19% APY with no minimum required balance. Therefore you can start saving with whatever is in your pockets.
The Ally Bank CD is also available in a traditional or Roth IRA for those who seek tax advantages while saving for retirement.
MyBankTracker.com finds that longer term CDs may not be the best option because current savings returns are extremely low.
If you have an online savings account, consider automating your savings by setting up recurring transfers to your account, even if it’s as little as $20 a month.
How to bulk up your savings
Having readily accessible savings is a must, but also requires constant vigilance and deposits of cash. A comfortable amount to place in a savings account would give you a three-to-six month buffer to cover your expenses in the event of a financial setback. Here are three tips to reach that goal:
1. Track your spending
Make sure you have a handle on your spending, whether its through creating a budget or some other personal system, so you know where to cut back to maximize savings. Your strengths and weaknesses when dealing with your personal finances will determine how you should insure your lifestyle.
2. Change your habits
Getting in the habit of saving can be done as easily as opening a dedicated savings account. By constantly squirreling away a little bit of your paycheck, your savings will be put on cruise control, and you will know that your discipline is paying off.
3. Devise a strategy
Once you begin accumulating funds, you’ll need a good place to keep your money, so when picking a high-yield savings account, remember low-risk, liquidity, and returns.
Low-risk investments and making sure your funds are liquid will ensure your rainy day fund will be available when necessary and easily accessible.
Also your earnings through interest must be strong enough to offset the demands of inflation because without this added insurance, your hard-earned savings will not be worth as much when you need it as it was when you stashed it away.