Your Savings Account Is An Indicator of Your Financial Health

According to the National Bureau of Economic Research, nearly half of all Americans are considered “financially fragile.” What does this mean?  It means in an emergency situation they couldn’t come up with $2,000 unexpectedly in the next month, or would have to resort to desperate measures to come up with the money.

What I found most interesting about the article is that you’d think it would be just a low-income problem. Well, it’s not.

A surprising number of middle class families – including 25 percent of those earning between $75,000 and $100,000 — are also “fragile.”  What’s even more distressing is it’s a bigger problem in America than in any other country.

Being financially fragile is just another way of saying, “you’re financially unhealthy and you’d better fix the situation fast before you die a slow financial death.”

So how does one become more financially healthy?  According to the research, if you want to save money -  and keep it out of reach, you must move it out of your spending account and into a place where there is a perceived barrier to getting at it. That’s why 401K’s work so well, because you can’t get at the money once it’s moved out of your paycheck.

Internet banking is a good choice to replicate this affect. (Ally Bank and ING Direct are both good choices.  They don’t have minimum account fees AND they pay higher than average interest rates.)   In order to get your money out, you have to transfer the money back to your checking account – which takes a couple of days.  Therein lays the barrier.  You’re really going to have to think about moving that money before you actually make the move.  In the end, you wait days for the cash.

Additionally, you should keep a separate account for sudden emergencies so that you can keep tabs of how much you’re saving in your emergency fund.  I keep $2,000 in a savings account at my local bank.  I have instant access to the cash if I need it and can easily transfer it into my checking account via online banking access.

My larger emergency fund, the one I would use if I were to become unemployed for any length of time, is kept in my ING account where it’s not easily available to me and would require me to wait for the money.  Additionally, I keep another savings account for money I am saving for projects around the house, vacations, and holiday shopping.

Of course, there are other areas one should look at to determine total financial health, but saving for an emergency is one area that most people overlook.  If you find yourself saving for a vacation but have nothing put aside for an emergency, I suggest you reevaluate your priorities and start to pave the way towards greater financial health.  You won’t be sorry you did!

Maureen Campaiola

Maureen Campaiola is a recovering over-spender, over-charger, and someone who was once teetering on the brink of bankruptcy. Maureen faced her money fears head on busting through her money drama and now enjoys the freedom that only true money recovery can bring. Maureen understands the stumbling blocks, mindset problems, and self sabotaging behaviors many women engage in that prevent them from making AND keeping the kind of money they want. What she has come to realize is just how your money story has a direct impact on your ability to make and keep the kind of money you want each and every year. She changed her money story, and as a Certified Money Breakthrough Coach, she’s here to help you change yours!

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