Stash cash to trim interest, build savings
Tuesday, February 7, 2006
MANHATTAN, Kan. - Living paycheck to paycheck - or spending more than you bring in - can leave you short on cash when the roof springs a leak or transmission on the car goes out.
Should you charge the repair to your credit card or investigate a small bank loan?
"Investigate a bank loan," said Carol Young, Kansas State University Research and Extension family financial management specialist.
"A bank loan will typically have a lower interest rate than a credit card," said Young, who advised setting aside money regularly to build an emergency fund.
Financial planners recommend an emergency fund equal to three-to-six month's income, she said. "If you're not in the habit of saving, don't let the thought of trying to stash that much cash discourage you."
"The important thing is to start saving regularly. Aim first for one week's salary, then one month's salary, then two month's salary and so on."
"Saving requires self-discipline, but need not be difficult," Young said. "Ask about payroll deductions at work and, if available, arrange for part of your paycheck to be deposited directly into an emergency fund savings account. Financial service providers also usually are willing to transfer funds from a checking account to a savings account."
"If designated savings are deducted before you receive your check, the funds will be out of sight, out of mind and less likely to be spent," Young said. "Think of saving like brushing your teeth. Make it automatic.
"When you meet your emergency fund goal, keep saving for long-term goals, such as a down payment on a house, retirement, education, newer vehicle and investments toward long-term financial security and peace of mind," she said.
For more information on managing money and savings tips, Kansans can contact the county or district K-State Research and Extension office or visit Extension's family financial management Web site: www.oznet.ksu.edu/familyfinancialmanagement/.