www.CUNA.org/newsnow  NEW YORK (7/13/11)  Two recent studies paint diverging pictures of current savings habits -- one reflecting a healthy increase in retirement assets, but the other revealing frighteningly low emergency savings, with roughly half of Americans unprepared to handle a financial emergency.

 

Americans are responding to the recent "hit" to their nest eggs seriously, by working a few more years and delaying retirement, increasing savings, or shifting to slightly more conservative investment vehicles.  Retirement assets are up 3% from year-end 2010, to $18.1 trillion and just below the record high of third quarter 2007, according to a study by the Washington-based Investment Company Institute.

 

However, one-quarter of Americans have no emergency savings at all, and another 22% admit their emergency savings would cover -- at best -- three months' worth of expenses, according to the most recent Bankrate Financial Security Index poll.  Only 24% of respondents said they have the equivalent of six months or more of basic living expenses in a back-up fund.

 

Persistent unemployment is a major culprit.  More than six million Americans have been unemployed for longer than six months, and many have had to drain emergency savings to make ends meet.  Others admit they're waiting until they have extra money but, more often than not, that day never comes.

 

 

$  First, set a goal.  Calculate basic living expenses -- needs, not wants -- for one month.  Then multiply that by the number of months you wish to cover, generally between four and seven, or more if you think it may take longer to land a new job if you lose yours.

 

$  Make your fund accessible.  Separate it from your checking account, and don't keep it where you'll be tempted to raid it for frivolous purchases.  Consider a money market account that allows minimum withdrawals, or short-term certificates of deposit that earn dividends and allow you to reinvest at set intervals.

 

$  Automate it.  Use direct deposit of your paycheck, then set up automatic transfers from your paycheck to the emergency fund.  If necessary, start small and slowly increase the amount you designate.  Make sure you have enough money in checking to cover bills.

 

$  Use it only for emergencies.  Your six-month car insurance payment isn't an emergency -- you know that's coming so budget for it.  Emergencies may include major car repairs, appliance breakdowns, job loss, medical bills, or accidents.