Date: November 15, 2016<\/p>\n\n\n\n
Conventional wisdom says that you should have at least six months\u2019 living expenses tucked away in case of a financial emergency, but saving more than this can be a hedge against a disaster that may never come. Saving too much is not likely to help you get ahead, so you might consider other options when you reach that six-month threshold.<\/p>\n\n\n\n
Saving vs. Paying Down Debt<\/strong><\/p>\n\n\n\n Interest paid on savings accounts at some of the nation\u2019s major banks ranges from .01 percent to 1 percent as of 2016. That\u2019s a minimal rate of return, so putting more cash than necessary into such accounts makes little sense. Although the money is readily available in case of emergency, it\u2019s essentially stagnating there if your goal is to raise your net worth.<\/p>\n\n\n\n You might want to pay down debt<\/a> instead after you’ve reached the six-month emergency savings<\/a> mark. If you\u2019re paying 15 percent interest on a credit card and earning 1 percent on your savings, you\u2019re 14 percent in the hole. You can always resort to those paid-off credit cards if an emergency strikes and you need more than six months\u2019 worth of living expenses, although you\u2019ll have to pay back the borrowed amount with interest, unlike money you take from a savings account.<\/p>\n\n\n\n Saving vs. Investing<\/strong><\/p>\n\n\n\n Another option is to invest<\/a> your money rather than stash significant amounts in a garden-variety bank account. However, higher returns typically mean increased risk, so the decision to invest your money, rather than simply saving it, depends to some extent on what you\u2019re saving for. <\/p>\n\n\n\n Date: November 15, 2016<\/p>\n\n\n\n If you\u2019re going to need the money sooner rather than later \u2013 in a few years or so for a new home or your child\u2019s education \u2013 you might not have all you need exactly when you need it. Investments that reflect fluctuations in the stock market can nosedive periodically, although they usually rebound over extended periods of time.<\/p>\n\n\n\n Saving vs. Buying a Home<\/strong><\/p>\n\n\n\n