The Savings Habit

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By John Watson

When I was young my dad always taught me to put away part of my money and "Save for a rainy day." At the time I didn't exactly understand what he meant by "a rainy day", but I do now. You never know when the car is going to break down, the refrigerator quits or a hundred and one other little accidents will happen that you will need extra money for. If you have extra money put aside you can shop around for the best deal, pay cash for it and save a bundle in interest.

I have since been told by other sources that to be on the safe side you need savings put away to equal six months salary. This should be liquid savings, not stocks, bonds etc. You need to be able to access this easily in case you lose your job or some other catastrophe strikes. This will be considered your short term savings.

Dad also told me, "Son, you are going to get old someday and you are going to need some money to live on." This is what is considered to be long term savings. This would be best invested in stocks, bonds or mutual funds. A good financial planner could help you select the ones earning the best interest at the time you are ready to invest.

Some financial analysts are saying that people are not saving as much as they used to. That seems strange, since most people are earning more now than they ever did, so let's see if we can find a reason for this.

#1. Our population has become too materialistic. Everything imaginable is advertised on TV, in newspapers etc. with little or no down payment and easy monthly payments. Everyone wants instant gratification, they cannot wait long enough to save the money for what they want so they buy on credit. The finance people love you for this because it is making them rich. After going deeper and deeper in debt you have no money
left to save.

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