Bulking Up Your Emergency Savings Account

With the economy showing signs of improvement, it's time to think of bulking up your emergency savings account. Why now? Here are three good reasons:

• You may be cutting things too close. A recent survey revealed that roughly half of Americans said they would fall behind on paying their bills if they were out of work for more than a month. This is not surprising given the poor savings rate Americans maintained during the last economic expansion, and it just reflects poor planning. Even in decent employment conditions, if you lose a job you can count on it taking more than a month to get your resume and applications out, start to get responses, go through the interview process, field an offer, and finally get to your start date. On top of that, given the changing nature of the U.S. economy, many workers who lose their jobs these days have to go through retraining before they can qualify for a new job. This takes much more additional time--and additional funds.
• You should bulk up the savings account when times are good. If your financial situation is improving along with the economy, this is the best time to bulk up your savings account. It's like training for an athletic event--you have to get in shape in advance, otherwise it's too late. Learn a lesson from the last economic cycle, and improve your savings rate when your earning power is strongest. As a bonus, you'll often find interest rates on your savings are highest during a strong economy.
• You may need to replenish a spent savings account. Many Americans have had to lean on savings--or build up debt--during the recent recession. There's nothing wrong with that--it's what savings are for, but it may also mean you have some catching up to do now.

One outcome of the recent recession is that everyone should be taking their emergency savings a little bit more seriously in future.

Source:

Brian O'Connor • Four ways to build up cash reserves in case of job loss • Aug 10, 2009 • Detroit news: http://www.detnews.com/article/20090810/BIZ01/908100344/1001/rss21