64% of Americans don't' have enough cash on hand to handle a $1,000 emergency, according to an article by Craig Guillot on MintLife.com.  And more than 40% of Americans have more credit card debt than money in their savings.

Building an emergency fund is one of the most important ways to protect yourself against financial disaster." counsels Guillot. "If you don't have money put away for emergencies, you're walking a financial tightrope."  This is the quickest way to fall into debt.

So, what happened to our "Rainy Day Fund", asks Neil Conan, host of Talk of the Nation on NPR.  "Putting away money to pay off that trip to the emergency room or a busted transmission can be tough if you live paycheck to paycheck, "he says.

How much is enough?  Aim for setting aside six months' worth to cover the basics such as mortgage, utilities, food and insurance... everything you need to function in daily life.

Sounds like a lot? "Something is better than nothing," says financial advisor Mari Adams. "Even one month is better than nothing. You need to have something put away to handle emergencies." But most of all, don't give up, she says. One listener of NPR called in to say that ever since he was a teenager, he made it a habit to put $1 a day into a box.  "It really adds up!" he said, "And then once a month I put it into my savings account."

Have a plan.   The easiest way to save is to automatically have a certain amount taken out of your paycheck and put into a savings account.  "You also need to be disciplined and not give into temptation to pull money from your emergency fund to take vacations, indulge in splurges or use it for non-emergency expenses." writes Guillot. 

Since the economic downturn in 2008, Americans have tended to save more and spend less according to a survey from BankRate.com.  Simple, small steps to save money can change your life for the better. 

When you have a rainy day account,"emergencies simply become inconveniences because you will have a cash cushion to rely on that wasn't there before." says financial expert and quthor Dave Ramsey. "Once you start saving, your financial life becomes full of possibilities which could include a down payment for a new home, college funds for your kids, retirement and charity that you never thought possible." 

A number of financial institutions are launching new types of savings accounts and rewards programs to entice people to save.  AmericaSaves.org is offering a free online program to help you get started called SaveUp.com.  "You link your bank and debt accounts on the site, and receive points for every dollar you deposit to savings or use to pay down debt." writes Naomi Mannino on BankRate.com.  "You redeem these points for chances to win cash and prizes from national retailers. Fear not, the website is encrypted with bank-level security."

A Good Way to Start Your Emergency Fund is to save your tax refund instead of planning on spending it.  "Americans are going to be a lot more tightfisted with their tax refunds this year, with more people planning to save the cash they get back from Uncle Sam instead of spending it." writes Jessica Dickler on CNN Money.   "Of those expecting a refund, 44% said they plan to stash some of it in savings, (that is) the highest percentage in the survey's nine-year history."

photo credit: 401K

Posted in Buyer Resources, Headlines

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