Preparing For Financial Emergencies Makes Sense
A recent BBC article spoke to the importance of financial preparedness and noted a strategy borrowed from the Chinese.
Saving enough to survive redundancy or pay for emergency repairs is not difficult. It requires only some planning and a few small changes.
Anyone can become a smarter saver and this includes people trying to provide for their loved ones after their own deaths.
Cultural Savings Rates
Begin by examining the financial expectations of the culture. While residents of the U.S. save only 3.2 percent of their income according to the U.S. Bureau of Economic Analysis, the International Monetary Fund reports that China has a 54.3 percent national savings rate.
According to a February 2013 article in the Mail Online, most Britons save only enough for the first seven years of retirement. Many of them may not have enough money saved to pay emergency expenses in the present.
Increase Savings Before a Crisis Hits
Financial experts recommend saving enough to cover living expenses for a three to six-month period. Entrepreneurs should save enough money to survive for 12 months without additional income. To determine how much your family requires, calculate post-tax income, total average monthly expenses, subtract ten percent, and multiply the result by the number of months for which the money is needed.
Every year, more expenses are moving from the discretionary to the essential column. Internet service and mobile phone contracts are two examples. Many parents are not willing to force their children to sacrifice sporting or other activities just because these come at a price. However, giving up dining out and weekly salon appointments is easy to do.
People with enough discretionary cash for an aggressive approach to savings may be able to amass an emergency fund within a year. However, most people are facing credit card, mortgage, and car payments that make it more difficult to save money each month.
By determining a reasonable savings figure and establishing automatic transfers into a savings account, the money will not be missed. Savings should not be linked to a debit card because doing so makes it easier to access the money.
Review the budget every six months to determine whether the amount of regular savings can be increased. Identify expenses that can be reduced or eliminated and place that money in the savings account. Review television and other provider bills to determine whether services can be decreased without negative effects.
Establish savings targets and track progress toward these goals. Leave the money where it is and save separately for a vacation or an expensive purchase.
Saving for Future Generations
People who have spouses and dependents should focus on more than themselves. They also need to save for beneficiaries who outlive them. Making regular deposits to a savings account is one way to do this but low interest rates make alternatives more appealing.
Allocating some discretionary income to purchasing an insurance policy can be a much more worthwhile investment. A term or whole of life policy with a payout that allows beneficiaries to live comfortably is a smart way to save for these future generations.