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Janice France-Pettit: Having a savings plan is even more important now

Union Bank

Posted: November 27, 2009 9:14 p.m.
Updated: November 28, 2009 4:55 a.m.
Although Americans are generally saving more today than they did several years ago, most could still benefit from spending less and preserving more for a rainy day.

Having funds set aside for a financial emergency such as a job loss or a medical need can often mean the difference between going into debt and staying “in the black.” Those who have established savings plans can also benefit by being well-prepared for their regular annual expenses and even family vacations.

Despite knowing that we should save, families often have a hard time committing to stashing money away each month, especially after paying bills. A Union Bank-sponsored study found that 66 percent of adults ages 35-44 said they just don’t have much money left at the end of the month and 72 percent believed they did not have enough money saved in the proper accounts to make it through 2009.  

The following information will remind you of the many reasons to save money and may help you realize the importance of being financially prepared for life’s planned and unplanned expenses.

n Short-term financial needs: Short-term savings goals may include annual expenses such as insurance payments, property or self-employment taxes or holiday gift purchases. Other short-term savings can be used for items such as a family vacation or a new car purchase. By planning ahead for these items and having a savings program in place, you may avoid going into debt or racking up large credit card fees. Some people like to think of these savings goals as “savings to spend” items.

For these savings goals, consider lower-risk savings accounts or money market accounts, which offer FDIC insurance to protect you against loss. These are designed to keep your money safe and make it easier to access.

n Long-term financial needs: Long-term savings are the big ticket items in life, such as a down payment on a house, college tuition or retirement, to name a few. These require careful savings programs. Saving for long-term goals often requires many years, so your risk tolerance may be higher. For this reason, you may turn to higher yield investment vehicles such as stocks, bonds or mutual funds. Although these may grow your money faster, they are generally more volatile in the short-term so consult a financial adviser to find a savings plan that is right for you.  

n Emergencies: Life sometimes brings unpredictable events that impact you financially and might affect your standard of living. Layoffs and cutbacks can force families to turn to emergency savings to survive. Illness and accidents are also unpredictable and can impact your life and force you to turn to savings to fund daily expenses while you recover. Even smaller unexpected financial needs such as a broken furnace in your home, major car repairs or emergency veterinary bills can force you to turn to savings.

Having a healthy savings account or nest egg can help you manage your finances and may help alleviate stress when life becomes unpredictable.

As you may know, some experts recommend having three months’ salary or living expenses set aside in a bank account to cover the unexpected.  While this might seem hard to achieve, one approach is to have an automatic withdrawal from your checking account or paycheck each month into a savings account.

Households with identifiable savings goals (both long- and short-term) are often more likely to have financial assets, so start planning to save today and make it a habit. You may find that even small increments of savings accumulate faster than you think, and you may be more prepared for whatever planned or unplanned events life brings.

The foregoing article is intended to provide general information about creating a trust and is not considered legal, financial or tax advice from Union Bank. Trusts, wills, foundations and wealth planning strategies have legal, tax accounting and other implications.
Please consult a legal or tax adviser. Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal.


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