How much money...

[PrincessFiona]

should you have in savings? I heard somewhere that your savings should be equivalent to two months salary....is that true?

kris

If our engagement ring is supposed to equal a months salary, I'd say we should be aiming for at least 3 in savings. That is cash savings, not including things like cds or stocks that would need to be converted.

I've heard two to six months salary in a liquid account as a general guideline, too.

[mommax3]

I had always heard three months, but when we met with our *new* financial planner last month, who is helping us manage our financial transition right now, he said that until our debt is paid off, we would be better off using a credit card that has an available balance for emergencies instead of stockpiling money (and even two months salary, once you get done with training, is quite a bit) that would earn little/no interest while at the same time we are paying interest on our debt each month. His point was pay down the debt as fast as you can because the interest you save is HUGE.

Just food for thought.

Sally

I agree that paying down debt should be a priority. I think that where the 2-3 months of salary figure comes from (in part) is that it often takes that amount of time before disability benefits start to kick in. And then there is loss of a job, that sort of thing.

[Michele]

I agree that paying down debt should be a priority.

I would normally agree as well....but...

Our student loan debts are at a very low interest rate, according to my latest research on the issue (hough admittedly not really extensive)...I'd be better served paying my debt down on a house, CC, adn investing than paying off my student loans...

But back to the question: I'd always read 3-6 months...

"The Millionaire Next Door" is a pretty neat book..frustrating at times because of our situations, but overall a good book.

[Meenah]

Well, we are sooo screwed!!!!!

Yeah, us too...

ha ha!!! I have also read that you should have a minimum of 6 months of your monthly salary in savings.
Yeah right.

[Sheherezade]

So, if you did have that kind of cash .... would you put it in a money market account or a short term CD or just "savings"? It seems like a lot of cash to have sitting around at a low interest rate.

Maybe a 30 or 60 day CD if not a money market account. I don't think you would want it the term much longer than that since it is for unexpected stuff. I just looked at average rates and the average money market account (over $10K) rate is slightly higher than a 3 or 6 month CD with the under $10K rate slightly lower. The CD probably wouldn't be worth it, just my opinion though....

[migirl]

We actually do have a small "emergency" fund that would probably get us through about 6 months if something were to happen. It's sitting in a high-interest money market account that I occasionally dip into for larger, unexpected expenses (e.g., car, home repair bills) and then I just replace the money. I've been thinking about taking some of it and doing a laddered CD at a slightly higher interest rate, but I'm not sure how comfortable I am with the illiquidity (is that a word?) of it since I have instant access to the money now.

[DCJenn]

We actually once had 3 months of income in our savings account. However, we went to Russia and came back with a baby. Poof! All gone. We just got Rick's bonus- and the computer got zapped by lightning (guess surge protectors don't always work!) but at least we were able to pay cash for the new computer. (an apple laptop and I'm in LOOOOVE with it!)

I did move some money back to savings and paid off one of the tiny credit cards. We still have a ton of credit card debt from the hotels and plane tickets plus the things like the visas (his and ours) and all of the up front cash payments we made. (like the $6600 cash I paid to a woman in her bathrobe from a red velvet lined van driven by a man named Valentin. Let's talk about my comfort level....) Slowly we are paying off the rest of the Little Dude Debt, but it pisses me off every month to not be able to pay of the accounts in full like I did when we were both earning money!

Jenn

[Vishenka69]

We have about 6 months of income in an online savings account (some of it in CDs) with an average rate of 4%. The only debt we have is student loans. Right after the wedding neither one of us worked for several months and we lived off the wedding money. So now I'm extra cautions.

This article has some good advice about short term savings:
http://www.fool.com/savings/savings.htm