Do you have money for emergencies?
Regardless of a family's income, there is always the possibility that a wage earner could become ill, injured or unemployed. There is also a persistent possibility of an unexpected expense, such as vehicle or appliance repairs, dental work, or travel. While certificates of deposit, individual retirement accounts and other long-term savings vehicles are important tools for financial planning, a local savings account is readily available and liquid when you need it.
"There are no penalties for withdrawing your cash from a savings account as there are with an IRA, and there's no interest to pay as there would be if you used a credit card to get through an emergency," says Cristina Briboneria, vice president of oXYGen Financial Inc. in Alpharetta, Ga.
"Having money in reserve is important for every family and every individual," says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. An emergency savings account makes it possible to pay in cash for expenses that "otherwise would cause the person to rush to a credit card," he adds.