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 I am the oldest of seven kids - definitely not a walk in the park. But my parents took their responsibilities of caring for their children seriously, my father working three jobs at times, my mother working one with many days of double shifts.

There were two things that they taught us as we grew, and I taught my children in turn. No matter how much  money you bring in when you get paid, these two rules should never be ignored. It can mean the difference between catastrophic devastation and a safe and secure future if you are affected by this or other recessions.

1. Pay yourselves first. No matter the amount of money you bring into the home on payday or the amount of money you owe to others, always put some of it away in a savings account (preferably one where you have a very difficult time withdrawing the money). The amount recommended is 10% of your after taxes take home pay. But any amount, if it be only $5 or $10 each paycheck - always pay yourself first. Who are you working so hard for? The government? Your boss? The grocery store? No, you are working so hard for you and your family. Always pay yourself first and when you get enough money to purchase a Money Market Fund or a Roth IRA (with a Roth IRA, money is taxed before being place in the IRA vs. a regular IRA where the money is taxed when you withdrawal it from  the IRA.) That $5 or $10 a paycheck will quickly add up to allow you to purchase a Money Market Fund that will yield you a better return than a regular savings account. The more you save, the more you will have available to you in case of emergency, vacations, college expenses or retirement. It's said if a young person is able to save $10,000 by the time they are 25 years old and never saves another penny - by retirement they will have earned well over a $million. However, that saying was before this recession. I am not familliar with the new calculations. Whatever they are, the fact is that you will have a great amount of money by retirement if you put away as small amount as $10,000 and never touch it again until you retire.

2. Always keep six months of living expenses saved for a rainy day - like when you lose your job. Having six months of household operating expenses will allow you to rest easy and be prepared to dip into that emergency fund when necessary.

By stashing six months of household operating expenses, you don't have to panic or worry when the bottom falls out of the economy because you've got your safety net to rely on. If you ever have to dip into that safety net, be sure to replace it as quickly as you can (even if it means you replace it by making payments to yourself until you've got at least six months worth of living expenses again. 

Once you've got six months of savings for your mortgage/rent, utilities, car payments, insurances, gas, diapers, and groceries - plan to begin stashing money to cover clothing (especially with young children who grow out of their clothes every couple of months) and any possible medical needs that may arise. This money should also be kept in a separate account from your regular ones - in an account that is difficult to get to without jumping through hoops to assure you don't touch it until you need it.

I went a little further by opening savings accounts for my children when they were young. When they received money for their birthday or other holidays, allowance or cutting grass, etc., I would insist that they bank half of any money they receive or earn and they can have the rest to do with what they want. If we went on vacation, I would allow them to withdrawal up to half of what they had in their account to spend on vacation. If half of what they had was less than $50, I would match the amount for them. But, I would NOT give them any money while on vacation, since I had already matched their savings withdrawal before going.

Following these two rules will save you many nights of sleepless nights and worry and your children will learn by example. I included my children, when they were older (middle school age) in working on our budget with us. As they grew older, they would have excellent ideas to share with the family budget and had by then created and followed their own budgets.

There is much truth in the quote, "a penny saved is a penny earned!"

Linda Bush
Richmond, VA

by on Jul. 25, 2012 at 4:17 PM
Replies (31-34):
by on Jul. 28, 2012 at 12:43 AM

 There is a post on here that gives you suggestions and instructions on how to save money on a lot of every day things - perhaps you could challenge yourselves to find the money to save out of taking the cash out of your budget with the money-saving ideas!

by Dawn on Jul. 28, 2012 at 8:56 AM
I would say have a year of living expenses saved up. I agree with the rest.
by on Jul. 28, 2012 at 10:29 AM

 The reccommended norm used by CPAs and money managers is 6 months. If you have a young/large family you may be right, if you can afford to have that much available cash out of reach, then by all means do it! But stop after that and put your savings into a credit union or money market fund or other recommended savings tool to increase your savings. Check with a financial planner at your bank or through your company's retirement program.


Quoting momto3isme:

I would say have a year of living expenses saved up. I agree with the rest.


Linda Bush
Richmond, VA

by on Jul. 28, 2012 at 4:42 PM

Glad that's worked out for you and hubby.

It's not for us, though.  Call it "low risk tolerance" or whatever...

My parents didn't follow the path you describe and are very well off, btw.  So well off that most of the people they knew who were following typical investment advice were surprised they weren't panicked when dad decided to retire.  Many of his colleagues had to keep working to regain what they lost in the crash.

Those same colleagues of dad's strongly suggested they "invest" as you do, and were telling him he was foolish to walk away from the ROI they were raking in at the time.  If dad had heeded that advice, he'd still be living in California in a house that lost over 60% of it's value the year after they moved (upon retirement) and he would still be working at 74 years of age.

Quoting jimbosmom:


Quoting Ametrine:

To answer the title of this post:  Yes.

Hubby lost his job last month and we have enough to pay our expenses for over two years. 

I think if you save all your money in a Roth or 401K, you're foolish.  Plain 'ol vanilla savings account for part of it.  The Roth and other investment accounts are tied to the stock market and in my book, that's a putting all your "eggs" in that stock market "basket" is a bad idea.

You hear it's wise to diversify, but of course they usually use that word when talking about stock/bond investments...I say diversify your savings into the areas of: cash at home, vanilla savings account, Roth/401K, physical gold and silver, buying clothing in sizes up for kids, and food/toiletry storage. 

 Dear Ametrine:

I mentioned two things to know about money. One was about saving for the future, the other was about having enough readily available funds to access in case you have an emergency such as the one you described with your husband.

There is only so much available cash you should keep in the 'plain old vanilla savings account.' Interest earned in most savings accounts is very low but safe for emergency savings.

Retirement savings however can be put into higher risk funds if you are young. As you age you will want to move your money into less risky investments until you reach my age when your investments are so safe you can sleep in them! : )

It was necessary for me to take a medical retirement in 1998 at the age of 42, and have played with the stock market day/week/month trading, turning $31,000 into $187,000! But I have no children at home and have an MBA in business administration. Many people do not understand how the market works and should not manage their own retirement programs without the assistance of a professional.

My husband is retiring with 38 years of service at the age of 58 in May, and nearly lost the majority of his retirement monies by not working with a professional and investing too much  of his retirement money in his company. When the stock market took a beating a few years ago, his Retirement program lost more than $250,000 overnight. With no professional to advise him (and of course he wasn't going to listen to his wife) he had purchased way too much % of company stock vs. other safer investments. It was nervewracking for me, checking the cost of his company's stock's opening and closing value for several years until just a few months ago when it finally surpassed the point it was when the market 'slipped.' I called him and we sold all of the company stock that day!

Playing the market is for the strong hearted and those patient enough to wait.

If you are going to open an IRA, I would go with a Roth IRA because it is taxed prior to investing and we have no idea what the tax rate will be when we retire and begin to draw funds from it. Investing in a plain IRA means paying no taxes on investing, but what if the tax rate is 50% by the time you retire? That is a lot of money to give up from your retirement money.

I recommend that most people save for emergencies and special projects in safe, plain vanilla savings accounts. We use a credit union to save for our real estate taxes, personal property taxes, projects (we are nearly ready to build a 3 car garage and put siding on the house) and our mortgage and car were funded through our credit union. It is nice to use a financial institute where everyone knows your name and you can get a loan with just a phone call.

Too many people take care of their household budgets and never teach their children anything about finances. My parents never taught me, but I learned quickly myself and made sure my children learned at an early age. Today, all three of them own at least one home, my oldest son owns three homes, renting two of them for extra income. Teaching my children came about because my oldest son wanted a Nintendo and a Sega System when he was young and I told him to save for it. I sat with him and taught him how to create a budget and he took it from there. He was the neighborhood entrepreneur who had most of the neighborhood kids working for him and his lawn care company. He got the jobs and supplied the equipment and scheduled the work with the various kids, he got a piece of their action and rent for use of his equipment. I had created a monster.

By the time his sister, 10 years his junior, was old enough to demand the child support checks I received because 'I got them because I had her,' I knew it was time to sit her down and explain how much it would cost me to live on my own and how much it costs me to live having to care for her. Today she is a graduate of Penn State, paid for on her own, by saving through the years and playing the stock market, learned by watching me as she grew older, asking me so many questions that she is nearly as good as me. Nearly. She is a Liberal Arts major who can play the market with the best of them! 

Parenting isn't just about teaching your children how to be productive adults, it means teaching them to give back to the community as much as they get from the community. It means teaching them to protect those weaker than they are, thinking of the consequences of their actions and how not to be a drain on the system by being responsible for their own needs. Being financially responsible is a big part of being a productive adult. We don't have the same benefit as Congress does, we can't just print up some more money when we have left ourselves short. We must plan ahead and follow our plan.

One by one we should be able to bring this country back to its original A+ financial standing. Spending every cent that comes your way is the government's way - not a responsible citizen's way to behave.

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