Emergency / Short Term Savings

I was actually able to combine these types of savings for the most part so I will cover them together. It is always a good idea to have a certain amount of accessible money for emergencies. I like to have a certain amount in my checking account for immediate emergencies and then another amount in an emergency savings type of account.

First the checking account money is important to have for emergencies that are pay now types. I would call a pay now emergency something like car problems you want to get the bill paid when the car breaks down. Also there are emergencies that may be pay "later" you can have a day or two to transfer the money from your savings account to checking to be available this might be something like injury or losing a job. Your checking account sum should be probably in the range of a months expenses you wouldn't be able to get much interest on that money in a month anyway.

The other emergency short term savings should cover about 3 months expenses just to have a time of recovering in case of problems. Larger amounts of short term savings should be held in an interest bearing account. There are quite a few options for short term savings from interest checking accounts, to savings accounts, even some CD accounts. I personally have been impressed with the opportunities presented by Money Market accounts. These accounts carry restrictions similar to savings accounts but have higher interest rates some are even around a 5% APR.

The choice of savings account type depends on how you like to access your money, how much rollover you might expect, and how much you are hoping to make in interest. Some examples of money market restrictions can be seen here. I am currently holding my short term savings in an internet money market which is at about 5% APR and is not too much of a hassle if you are used to online banking. It gives a decent amount of flexible access and can be accessed for short term needs.

Introduction to Saving

Savings that little bit of money set away for a rainy day. We all know that we should be saving money for the future not only is it a healthy and safe practice but it is liberating and necessary if we hope to have something to keep us alive later on when we might decide to retire. There are many different forms of saving money for the future and also different types of savings. I will try and go over 3 major types of savings:

emergency savings
short term savings
long term savings

These 3 types of savings are usually handled in different ways and I will go over experiences with all three. One other thing I want to stress is the power of savings to bring freedom and peace of mind into your world. Being able to cover your necessary living expenses for several months for example allows you time to recover from loss of a job, injury, or other losses of income. If you are not able to cover these things not only would you have more worries but may face such things as eviction. We want to control our money so it does not control us. Well on to a little bit of savings then.