Craig Guillot over at Mint.com had a great article about saving for a rainy day. In his article, he points out several concerning facts. According to a 2011 survey by the National Foundation for Credit Counseling, 64% of Americans don’t have enough cash on hand to handle a $1,000 emergency.
To handle the crisis:
- 17% of respondents said they would borrow from family or friends.
- 17% said they would neglect existing obligations.
- 12% said they would pawn or sell belongings.
- 9% said they would get a loan from a cash advance store.
To be perfectly blunt and honest, $1,000 is not enough emergency cash if you are investing in the stock market. In my book, The Confident Investor, I suggest that you have 6 months of cash on hand. At an absolute minimum you should have 3 months.
If you save 10% of your income from your paycheck, it will take you 2.5 years to have 3 months of income saved in your emergency account. The longer you wait, the harder this becomes and the more important it is to accomplish. Jump over and read Craig's article as it will give you some good ideas to set up your savings.