Emergency Savings | How much is enough?

Growing up, my family was not exactly well off.  To be honest, looking back, I’m surprised we were able to get by the way we did.  My mother supported me and my sister on an elementary school librarian’s pay, with probably help here and there from a relative.  Overall though, we survived because my mother was thrifty, always clipping coupons and only buying items on sale.  This wasn’t a willy nilly type of thrift but rather calculated; she never bought something unless it was needed.  Despite all this, we knew that if the school system laid my mom off we would be in deep trouble.  Even though she scrimped and saved the best she could, we had no real emergency savings.

Now that I’m in the real world and supporting myself the thought of having no emergency savings nearly gives me a heart attack.  My first two years here I was basically living paycheck to paycheck and trying to save but it’s hard when you live in one of the most expensive cities in the US.  Today I have about two months of expenses saved up in my emergency savings and I’m still freaked out about it!  I honestly don’t think I’ll feel safe until I have at least 6 months saved.  I know that that seems absolutely crazy and is a HUGE waste of capital.  I mean, just yesterday I was writing about buying a house, which would totally use up a good chuck of my capital, as if I have no problem dipping into my emergency savings.  Let’s get this out of the way, I definitely don’t want to dip into my savings like that.  But if it can save me money in the long run AND help me develop a potential income source, I think it would have to be worth it.

The thing that really prompted all this talk of savings was an article on CNN that I read the other day.  Did you click on that link?  No?  Go ahead, I’ll wait while you do it.  Ah, there you are.  Now that you’ve read it let’s just think about this: 28% of Americans have zero emergency savings.  Yikes.  I know that we’re still reeling from the economic turmoil and high unemployment but seriously, that’s terrifying.  what’s worse, I fall into the 49% of Americans that don’t even have three months worth of emergency savings.  Granted this is better than in 2006 when the number was 61% (!!!!) of Americans.  I suppose we’re slowly learning our lesson.  I mean, credit card debt is down and overall savings has been rising consistently for the past four years but still, the numbers are terrifying.

The point is, I need to save more! In my first post I wrote that one of my goals was to get to three months of expenses in my emergency savings.  The closer I get to that goal the more I realize that three months is nowhere near enough.  So, let’s amend this goal!

The New Goal:

1.  Six months of Emergency Savings

There we go.  That was the easy part.  Up next, how to actually save that much money!!