I do. My parents brain washed me when I was about 23 into thinking I need six months worth of living expenses in my savings account. (Don’t ask me where they come up with that number)
Anyway, I’ve only achieved this goal a handful of times and never for very long. (I’m 38 now) I do keep it fairly close tho’. Usually around the four month mark.
I was amazed to hear that a friend of mine lived off her savings for an entire year!
So with out getting too personal on the exact amount you keep in savings; do you have a target amount? Or do you just contribute when it suits you? Or are you thinking: “Savings account? What is this savings account you speak of?”
I get really uncomfortable if it drops below the point where it would support me for 5 years. When I was 45, I lived off my savings for a little over two years. I’ve got about 6 years’ worth at the moment.
I currently could live off my savings for more than a year. However, since I am getting less than half of what I’m paying on mortgage, I’m thinking of paying off my house instead.
I have to have a certain level in my checking account. Anything above that goes into savings to keep it from burning a hole in my pocket. I’ve been gradually increasing the level as the years go by. What seemed nice and fat a few years ago is now the base level below which I feel uncomfortable.
Like 3acresandatruck I would be uncomfortable with less than 5 years of living expenses. Right now I have close to 10, depending on how frugally I live. I’m in my mid 30s and hope to be able to retire at 50.
We keep enough in savings to pay the bills for a year and we never let that account drop below 40K. Each of us has our individual savings accounts too and I have about 5K in mine and I have no idea what he has. I think that it’s fine to just have 6 months stashed away if you don’t have a lot of responsibilities like a mortgage or kids.
Khadaji I paid off extra principle for the first few years but then I decided to stop and save the year’s worth of bills because if something happened and we couldn’t make a payment they weren’t going to care how much extra we had paid. Now that we have enough savings to get through a year I’ll start paying off more principle again. I was really surprised and relieved at how little it would take to get through a year and how much of our money was going for non-essentials. We also have very good pensions and last time I checked I still had about 50K in my 401(k). We should be fine in our old age.
I try keep enough in the bank that I can leave my job at any time. I call this my “fuck you” money. It isn’t enough to retire, but at least I won’t find myself trapped in a bad situation.
Right now, about 6 months of salary is a realistic goal for that savings account.
Speaking only for myself: Yes, I meant a savings account (money market, but not one of those money market mutuals that were in trouble recently) at my credit union. This is money I can get at today, if I have to…without penalties. In the past, it’s come in handy when a sibling needed a quick loan to get over a hump or something - in addition to being cash I can live off of. I have investments as well, but I didn’t count that in my reply.
Mine is way over my target amount (one year’s expenses), but I’ve had problems finding places where I could invest it that don’t tie it up until retirement and beyond.
My thought is if I lose my job I should be able to find another job if four months easy. That may be a little over confident being what the market is for my job field.
But then I always think I can just always cash in my 401K, worst case scenario.
I could live for years on that.
We keep a bottom line amount of emergency money in savings, as well as the money we’re saving for our next CD. The emergency fund should cover appliances and that sort of thing, should we have to cough up a new fridge or a major car repair or something.
A banker friend of mine said you should never have more than $5K in savings. If you do, your money isn’t working hard enough for you. Of course, you have to save it somewhere, so we figure anything over $5K is being saved toward a CD. We generally buy those when we have about $5K saved.
Nope - no target. Just the idea that a portion of my earnings should always go to savings. Over time some money gets saved some places, other get saved elsewhere. As I passed 40 the importance of saving for retirement became more obvious. And there’s no real max on that - simply at some point will I have enough to retire.
We’ve got 3 kids, so a big part of our savings has been aimed at college. Up until 3 months ago I had 12 years of state school covered. Then I made a rookie mistake and didn’t pull it out of the stock market. Suffice it to say I no longer have it covered!
With a house and family, I’m not going to be quitting my job, so I don’t need “fuck you” savings. My job is very secure so I don’t need to worry about that. And I’ve got enough for short-term disability should the worst happen.
The flipside, tho, is remembering my dad saying before he died “I shouldn’t be this old and have this much money!” So it can’t all be about savings if that means denying yourself things you really want. But that is a problem I won’t need to worry about at least until after my kids are out of school . . .
Suze Orman tells me my next step in my plan is to have 8 months of living expenses saved up, so that’s my goal. I just got done paying off all my debt (except mortgage) so that’s where I’m going. I’ll be putting it in a high-interest account tho, not just my little Credit Union savings account.
Having a year or two would be nice. I hope to be able to expand to that someday, but my goal after savings is to get some work done on the house.
Damn, you people are all in better shape than me – I’m just trying to get mine to down-payment levels. After that I’ll try to get some rainy-day funds going, but I’m also past the point that I should do something just in case I live long enough to retire.
we have a minimum of 20K. When it floats over 30K, the excess gets shuffled off into taxable accounts for long term investments.
We differ from other people in that our checking accounts gets a non-negotiable fixed allocation every paycheck and the rest gets deposited in our savings by default; it’s the other way around for most people.
While the advice makes sense with respect to interest and growth, in this economic climate where bankers are highly suspect, and an inflation rate that’s practically dead in the water, ordinary savings isn’t that bad.
Better still would be to have CDs in federally insured places with different term lengths. In other words, say you have $17K to save as your rainy day fund. Keep $5K in an ordinary liquid savings account you can access 24/7/365. Of the remaining $12K, invest $1K at the beginning of each month for the next year in one-year CDs. That way at least $1,000 comes available every month if you need it after a year. Otherwise, roll it over into another one-year CD. If you have have more cash available, increase your CD rates to two years, or more. If you really have the cash you might get up to monthly five-year CDs with monthly roll-overs. You will always have cash available and at a decent rate of return.
I currently have about a years worth of expenses in my savings account. Maybe 15 months if I tighten my belt. My previous goal was 6 months worth, but about 5 months ago, I decided that I’m a lot happier with a full year’s worth.
