On The Money

Build an Emergency Fund, by Erika Milosevich of North Shore Bank

For many years, financial planners have advised people to set aside three to six months of living expenses – enough cash to cover mortgage, car and tax payments, insurance premiums, utility bills, food and gas – which they can easily access in case of an emergency like a job loss or unexpected medical problem.

But in these days of corporate cutbacks, massive layoffs and other economic concerns, the industry has revised its thinking, and experts now recommend a 9 to 12-month safety net.

Sadly, a 2008 survey for the National Foundation for Credit Counseling found that Americans aren’t doing a particularly good job of maintaining even a minimal emergency fund. One-third of those surveyed had absolutely no non-retirement savings, and 57 percent of those who did have an emergency stash didn’t have enough in it. That’s a dangerous position at a time when the average job search is taking 4.5 months, and even those employers who aren’t cutting jobs are cutting back on bonuses, raises, 401(k) matches, insurance coverage and other financial benefits.

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