How much "cash" should we have in savings?

[drakethib]

Example.

Excluding 401K.

If someone made $10,000 per year should they have $3,000 in savings?

Or should it be a mixture of cash, cd's, etc.

Any advice would be appreciated.

Thanks

 

[JimB.]

My "financial guy" tells us to have at least 6 - 8 months worth of living expenses in easily tranferable funds.

Cash, money markets, equities.

CD's are not good because they are subject to penalties if liquidated prior to maturing.

 

[Aimeedyan]

We are aiming for 6-12 months worth of living expenses in a savings account.

 

[disykat]

We try to keep 3 months in liquid assets, but sometimes have even less. We have investments we could access if we absolutely had to. We have disability insurance on dh. My dh is the only breadwinner, but he has a very secure job and our expenses are such that I could immediately start substitute teaching as much as possible and cover most of them. We also live in an area where we could sell our house immediately if needed. We feel pretty secure worrying more about long term savings than short term.

 

[disneysteve]

Example.

Excluding 401K.

If someone made $10,000 per year should they have $3,000 in savings?

Or should it be a mixture of cash, cd's, etc.

Any advice would be appreciated.

Thanks

drakethib - First, allow me to suggest that you post this question on the Budget Board. That's where lots of the financial folks hang out.

But since we're here...

The usual recommendation is 3-6 months of living expenses. Which end of the range you should be at depends on various factors like how secure your job is, how well insured you are, what other investments you have, etc.

So how much you need really isn't based on income but on expenses. Sit down and figure out the minimum you would need to get by for 3-6 months. Then keep that amount in liquid accounts. A money market mutual fund is usually your best bet as far as interest and accessibility.

 

[disneysteve]

We have disability insurance on dh.

Disab. insurance is a great idea and often overlooked. But don't forget that most policies have a waiting period before benefits begin, generally 30, 60 or 90 days. So you still need that emergency account to draw from until the disability payments start arriving. I have a few linked policies personally with either a 60 or 90 day wait.

 

[Caradana]

About 3 months' salary in money market or money fund; about a year in mutual funds.

D