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The Essential Three-Month Savings 

Charlene Nelson
 September 7, 2022
 •

Budget Wise 

Charlene.nelson@mydakotan.com 

Budgeting is essential to financial well-being, and yet it is one of the most difficult things to implement.  So you'll understand if I return to the topic every now and then. It may be time to check and see if you are on target to meet your budgeting and saving goals. 

After prioritizing your spending, saving is the next most important step to a healthy budget.  There are two types of savings: short-term and long-term savings. Today, let's look at short-term savings.  
 
Short-term savings is the thing you will use for a big-ticket item you want to pay cash for: a car, a house remodel or a trip. But most importantly, you need short-term savings for emergencies. This could be something like getting laid off, a car accident, emergency purchases or, heaven forbid, a fire or tornado that damages your property.  
 
We were told that when my husband retires at the end of the next month, it could take up to three months before he can start to receive his pension. Fortunately, we've saved up enough that a three-month gap in income will not be disastrous.  
 
An emergency fund is a must 

All financial experts will tell you that you need an emergency fund that will cover at least three months of your income. Most encourage a savings of six-month's income. That sounds pretty overwhelming, doesn't it? So don't think of that end goal. Instead, start small, with a goal to put $1000 in savings. Over time, work steadily to add to that each month till you have enough to cover three months of your family's expenses. 

Here are some ways to build up that emergency savings account: 

Set up your paycheck to save automatically. Notify the payroll department at your employers to send a a portion of each paycheck to a separate savings account. This is the easiest and most effective way to save, and it puts extra cash out of sight and out of mind. Automatic savings means you have a process in place to save at regular intervals, whether that’s monthly or weekly. Ask the HR representative at work for more details and set this up today. 

(Photo: Pixabay)

Save your windfalls. Every time you receive a windfall, such as a work bonus, inheritance, contest winnings, rebate checks or tax refund, put it into your savings account. 

Save your pennies. Literally. Have a jar on your dresser and every night, empty your pockets of all your change and put it into a jar. We have a giant piggy bank in the family room. Whenever anyone finds a coin or has loose change, it goes into the piggy bank. At the end of the year we find we have $50-60 dollars in coins. We use it for a family night out, but it could just as easily go into a savings account.    

Use coupons. Every time you use a coupon, put the savings into your coin jar.  
 
Get an app. Check with your bank or credit union to see if they have an app or program that lets you round up your purchases up to the nearest dollar. Put the difference into a separate savings account. 

Use a financial investment app, like Acorn, where you set a weekly or monthly amount to invest. You can start with as little as $5 a week. It also lets you round up credit card purchases to the next dollar and puts the difference into your savings or investment account. 

Use a cash back app such as Ibotta on many of your regular purchases. Put your cash-back savings into your emergency fund.  
 
There are also search engine plug-ins that also give you money. Honey will not only tell you where to find the lowest prices online, it will give you cash back on many of those purchases. Brave also has a cash-back reward system that accrues as you use their browser. 

Work one small step at a time. If you can find just $10 a week to save, you will have over $500 at the end of a year.  Once you reach the goal of having a short-term emergency saving, you’ll have created a savings habit that you can be proud of and that will put you on solid foundation for years to come. 

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