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Savings: Your Key to Financial Security

February 2008

Elaine A. Courtney, Family and Consumer Sciences Educator,
University of Florida Extension-Okaloosa County
Barbara O’Neill, Ph.D., CFP®, Extension Specialist in Financial Resource Management,
Rutgers Cooperative Extension

One of the most powerful ways to increase your financial security and grow wealth over time is to develop a “savings habit.” Media reports and advertisements by financial firms provide lots of advice about how to become financially secure, but the simplest and most basic strategy is to “pay yourself first” and save a portion of your income on a regular basis. In other words, treat savings like an important “bill” that has to get paid.

It is more important today than ever that Americans adopt this simple idea. The U.S. savings rate is the lowest it has been since the Great Depression. In addition, household debt levels and foreclosure and bankruptcy filing rates are high and housing values have declined in many areas of the country. All of these factors support the need for savings. In other words, “saving for a rainy day” means starting to save now!

So, why should you save? There are many reasons for saving money:

  • Purchase “big ticket” items
  • Pay for high cost goals (e.g., house down payment, college education, car purchase)
  • Retire comfortably
  • Accumulate money to invest
  • For security and peace of mind
  • Build an emergency fund
Let’s talk some more about emergency funds. You may think you can’t afford to have an emergency fund, but you can’t afford to be without one! Why? Stuff happens! And most of the time, it costs money!! By setting up an emergency fund, you protect yourself from the unknowns. Think of this fund as your “safety net” just in case something happens (lose your job, car breaks down, broken arm, etc.). Without this reserve, you may be tempted, or forced, to go into debt—debt that may take you years to pay off and cost you much more in the long run! Having an emergency fund gives you more options to handle life’s unexpected events.

How much savings is enough for an emergency fund? Most financial experts recommend having three to six months living expenses set aside. The amount will depend on your personal situation (job security, income level, needs). Some of this money should be kept in liquid accounts, such as a money market fund, while other funds could be tapped from a low-interest source such as a home equity loan.

Your emergency account should be easily accessible, just not too accessible! Financial institutions offer a variety of savings accounts, such as passbook savings, money market funds, and short-term CDs, which work well for emergency savings. How do you get started? One of the easiest ways is to make your savings automatic. Check with your employer and bank or credit union about direct deposits or transfers from checking to savings. You could also try saving a small amount each week and make deposits into your savings account.

The most important thing is to get started now. If you are already saving, try increasing the amount that you save. The results, over time, will be amazing. For additional information about the benefits of saving, visit the America Saves Web site at There, you can enroll as an American Saver at no cost and receive periodic motivational newsletters. The week of February 24 to March 2, 2008 has been designated as America Saves Week and will be marked with events promoting savings for both children and adults.