All in the name of research

Thursdays are reserved for YOUR questions. If I use your question in the blog, you win a $5 Target Gift Card!

Jennifer J. from Las Vegas, NV sent me the following email:

Dear Cici,

How much do you think a family of four needs to have in savings at any given time? We are FINALLY debt free, and now we want to start saving money- so we do not have to go into debt AGAIN if something comes up. Thanks!

Dear Jennifer,

First, let me applaud you for being debt free. I see you live in Las Vegas. If I lived in Las Vegas, not only would I NOT be debt free, I would also owe my first born to some guy named 'Guido Bag of Doritos.'

I LOVE Las Vegas! The lights, the sounds, the smells. The food, the money, the timelessness of the city. I wish I was there right now.

Enough about me- let's talk about you. What do you think of me?

Ok! Ok! About you- where were we? Oh yes! Savings!

Well, "They" say you should have three months worth of monthly expenses socked away for a rainy day. First of all, I have NO idea who 'they' are, and why they have an opinion on every subject. Second, I think it's unrealistic to believe that most people can afford to sock away the chunk of change needed to create such an account.

I can't give you a number- every family is different. You need to decide what constitutes an emergency in your family, and what doesn't. Then decide what you would be willing to pull out the plastic for. As an example, let's say you have a $1,000 emergency fund for things like a new tire, or an ER co-payment. That would be great. But what if you needed FOUR new tires, and an alignment, AND to pay the deductible on your car insurance? The $1,000 would not be enough, and you'd be looking for the plastic. Are you willing to go back into debt for that? If not, then you need to make your savings bigger.

Of course, you COULD take the $1,000, head to The Mandalay Bay and put it all on red. If you win- you have $2,000- if you lose- well, you realize why I sit and write this blog for a living as opposed to being a financial planner.

Many people have their savings account with their home bank. I recommend you do that for your 'emergency fund', so you have access to the money immediately. But, for anything bigger, you may want to put it in an account with a bigger return. Like ING Direct. Last I looked; the yearly interest rate was close to 5%! Do NOT touch the emergency fund for ANYTHING BUT emergencies. A new pair of J.C.'s does not constitute an emergency. I know, they should. But they don't.

I have my emergency fund threshold, an amount that I do not feel cozy going below. If I use any of the funds from this account, I can not sleep until I am back at my level. I make it my first priority to pay myself back. You should too! Charity begins at home.

A great way to start a new emergency fund is to pick 2 days a week as 'Save days.' Do not spend a dime on these days! No gas, no food, no shopping. NOTHING. Take what would have been your 'allowance' for those days ( Your weekly budget divided by seven- times the two days) and put it in savings. It can add up VERY quickly!

I also heard that certain banks are now rounding up debit card purchases to the next whole dollar- and putting the difference into a savings account for you. If you charge $2.62 at CVS, the bank will make the total charge $3, and put the .38 in your savings account. You won't miss the .38 in your checkbook ledger, but at the end of the month- you can have a nice little account started.

If you would like, I can ask my boss if I can fly to see you, and we can sit down and make a blueprint for your savings plan. I would estimate we will need approximately ten days, and a suite at Bellagio- only the best for us, Jennifer! A per diem spending account would help too! What do you think?

Until we meet again,

Cici

Cici@MyCoupons.com