Financial Friday: Options for building your savings
HUNTSVILLE, Ala. (WAFF) - Having a personal budget will help ensure you aren’t doling out more money than you have. A good spending plan can help you pay for those immediate needs, save for the unexpected and the expected.
A lot of financial experts recommend the 50/30/20 budget, where 50% of your income goes to needs, 30% goes to wants, and 20% goes to savings and debt.
We spoke to Kaeshier Fernandez, a Financial Education Coordinator at Redstone Federal Credit Union. He says using that method for savings will give your savings a boost. He calls it the “Triple Threat of Savings.” He recommends saving 50% in an Emergency Savings account, 30% in a Rainy Day savings account, and 20% in a Personal Savings account.
Here’s how he broke it down:
50% Emergency Savings Account
- Think potentially long-term emergencies (Job layoffs, government shutdowns)
- A recent survey showed that about 56% of Americans are unable to cover an unexpected $1000 bill. (Source: Bankrate)
- This is the biggest portion of your savings so you can get closer to your ideal emergency savings (3-6 months of essentials) hopefully sooner.
30% Rainy Day Savings Account
- Think mid-term emergencies or unexpected bills (weather/natural disasters, car repairs, broken arms)
- This is separate savings account for smaller emergencies so that you don’t have to touch your long-term emergency savings.
20% Personal Savings Account
- Think short-term savings goals (personal wants, Christmas/Birthday gifts, vacations)
- This will allow you to still save for the things you want without having to touch either of your more important savings accounts to let them build.
Bottom line, if one savings account is enough for you now, Fernandez says you ideally need a minimum of 3 months of living expenses saved.
For more ways to save, be sure to tune in at noon every Friday for WAFF 48′s “Financial Friday” segment.
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