BUILD AN EMERGENCY CUSHION USING AN AUTOMATIC SAVINGS PLAN
4. Build an Emergency Cushion Using an Automatic Savings Plan
If you find it impossible to save any money, you’re not alone. But once you’ve gotten rid of your high-rate debt, taken care of Crib Notes 1 and 2, and started on Crib Note 3, it’s time to begin stashing away three months’ worth of living expenses in a safe spot.
Your safest choice is a bank savings account. You can have the money automatically withdrawn from each paycheck and funneled into your savings. That’s a relatively painless way to force yourself to accumulate money.
A second choice is a special type of investment called a money market fund. Money market funds have historically been considered almost as safe as bank savings accounts and tend to pay higher interest rates. To find a money fund, check out websites like www.bankrate.com and www.imoneynet.com, which provide a list of the highest interest rates currently being offered. You can set up an automatic transfer from your checking account once or twice a month so it’s as easy as saving in a bank savings account.
No matter what type of automatic savings plan you choose, focus on your goal of at least three months’ worth of expenses.
Crib Note #5: Consider investing in stock and bond funds