Saving for a rainy day: The importance of an emergency fund - AmericaNowNews.com

Saving money for a rainy day

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You know you need a rainy day fund. But here's the question -- how do you do it and how much should you put in it? Money Expert Nathan Bachrach has the answer.

The conventional wisdom used to be to have three months worth of living expenses stashed away. But now with more than five and a half million Americans out of work for 26 weeks or longer, you're going to need more.

Ideally, you should have nine months to a year of income in an emergency fund, just in case you lose your job.  That's especially true if you have children, and just one income in the family. And don't underestimate what you'd need to cover.  It's not just your mortgage and groceries. There's gas, childcare, and all the rest of the monthly bills.

The problem, of course, is that many unemployed workers don't have anything close to nine months' saved, so their expenses are going on to credit cards. Then, when they finally do land a job, they're stuck paying back a mountain of credit card debt. 

Bachrach says you should consider this a wake up call. If your fund is light, or maybe non-existent, try to sock away at least 10% of every paycheck. He adds that this should be a top priority, so consider making the savings automatic so you won't even see the money being put away.

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