Question of the Day: How Much Have You Saved

Posted on 25. May, 2006 by in Saving & Investing

This question was inspired by an article sent in by a reader, Laura Byrne, which outlines a study commissioned by LexisNexis Martindale-Hubbell’s

The study reports that almost one-half of all U.S. adults (45%) say their household does not have enough money in liquid savings to cover at least three months of living expenses! Some other interesting bits of information from the article included:

  • About one in ten adults (9%) say their household does not have any money in liquid savings, defined as any savings readily available as cash and not intended for long-term investment.
  • 13% say they generally save none of their monthly household income in liquid accounts.
  • For those earning less than $35,000 a year, nearly one in five (19%) does not currently have any money in liquid savings, compared to 4% of those earning $35,000 or more.

To be perfectly clear, three months worth of expenses is the minimum that you should have saved up – regardless of your income. In a perfect world, and something that I am personally trying to achieve, is an “emergency egg” worth 1 year of living expenses. But you should at least shoot for a 3-6 month reserve.

It’s also important to emphasize that these savings for emergencies should be separate from your retirement or investment accounts – this money should be in a liquid form (i.e. can withdraw today) and not in some stock market account that would take 3 days to sell and transfer into your checking account. Because when a disaster hits (financial, economic, physical) you probably won’t have 3 days to wait for your money to arrive.

I didn’t want people to feel embarrassed or anything about answering this question in the comments section so I’ve added a little poll below. Please take a second to report on how much liquid savings you have saved up in case of an emergency.

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6 Responses to “Question of the Day: How Much Have You Saved”

  1. Chris Campbell

    26. May, 2006

    Results might be a little skewed on this blog =)

  2. Mike Stickel

    26. May, 2006

    How many extra points do you get if you’ve just used the majority of your saved cash to pay off a bank loan?

  3. Jordan T. Cox

    26. May, 2006

    I just wanted to point something out. Since this post doesn’t exactly state it – I’m wondering if the study includes college-going individuals. This includes anyone caught by the term “adult”, but with a large bi-yearly drain on their accounts that prevents them from saving much at all. I know that I personally rely on friends, relatives, and money in that long-term investment account I call for “tuition” if I fall into an extended ( > 1 month) time of need. Just thought I’d point that out.

  4. Josh

    15. Aug, 2006

    I am currently paying 30% of my income towards paying off debts (mostly credit card). I should be debt free by the end of the year, and then I can put that full 30% towards rapidly growing my savings base. I recommend this tactic to anyone who is paying off their debts. Once you’re in the black, just pretend like you’re still making those monthly payments.. but directly to your savings account! You’re already used to the monthly bill.

  5. Jason Guthrie

    15. Aug, 2006

    I would second that recommendation Josh – sounds like you are on the way to creating some real wealth there!

  6. Laura

    30. Oct, 2006

    I am a single woman who just morgtaged a home, and put everything I have into it. I thought my payments would be liveable, only 200.00 more then the apartment I was renting, but the utilities and taxes are killing me. I wish I could save. I have only 800.00 in my savings and am 55 years old. God knows what I would do if I got sick.
    I dont’ make alot of money and wonder if I should of stayed renting and kept the 20,000 in the bank. I’m divorced and didn’t get a pension from my ex-husband.

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