Save your pennies the smart way…

5 Tips to Help 40-Somethings Save for a Rainy Day

 Selena Maranjian | Daily-Finance | Sep 19th 2013 | link
Man holding piggy bank, raising fist and smiling at camera
Getty Images, PhotoAlto

If you’re in your 40s, your main financial goals might be paying your children’s college bills and funding your retirement accounts. There’s another important financial goal you need to meet, too, though -– building an emergency fund.

It’s easy to assume that disasters won’t strike you, or to simply hope for the best. But disasters do happen to lots of people who are also not expecting them — things like job loss, an expensive medical crisis, or a major home repair emergency.

An emergency fund will protect you from being wiped out or left in financial dire straits. It should be stocked with at least a few months’ worth of living expenses (think food, rent, insurance payments, utilities, gas money, etc.). If you’re risk-averse, have dependents, or are in a field where it would take a long time to land a job, you might want to sock away as much as nine months’ or a year’s worth of living expenses.

Here are some tips to get your fund started and well under way:

1. Establish your fund in a sensible place. A savings account, money market account, or short-term CD is a good idea. Long-term CDs will levy penalties if you need to withdraw funds early, and the stock market can be risky because stocks can plunge over the short term.

That said, though, if you’re willing to take on a little risk, you might keep a few months’ worth of emergency money in a safe place such as a savings account, and keep the remainder somewhere that will offer a little more growth.

2. Make saving easier through automation. You might, for example, set up automatic withdrawals from your bank account into your emergency account. Your employer might be able to automatically deduct a set sum from your paycheck, too, and plunk it into your emergency fund. The point here is to set it and forget it, since you’ve likely got a lot of other things going on.

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Author: kimhuntkw

We specialize in Real Estate in the Pleasanton, Dublin and Livermore areas of the East Bay in California

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