5

Emergency fund 101

Host Tess Vigeland, Sr. Producer Paddy and Jill Schlesinger of CBS MoneyWatch come together this week to discuss the importance of the emergency fund. We know that we here at Marketplace Money are a little bit obsessed about emergency funds, but haven't the last few years driven home how important one is?

Jill talks about how to calculate how much you should save and how to save it.

"The emergency reserve is a boring, safe place, where you can access your funds if -- god forbid -- something changes in your life," Schlesinger said. So no moving your emergency fund into a perhaps more sexy, but risky stock market. That's not the point!

And this week's caller ended up being a model saver! Take a listen to the audio above on how to build up your emergency savings -- among others!

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.
Log in to post5 Comments

I'm glad the engineer shared his story. My husband and I didn't start saving until last year. I am in my early 50's and he is in his 60's. We have only $200,000 in our retirement account and have $6000 in savings. I am trying to save everything I can. We don't spend a lot...we just still have credit card debt and a large tax bill we are trying to pay off. We both have good jobs and together make a little over $200,000, own a house with a mortgage of $1800/month. Would love to hear ideas on ways to save.

When I heard the show after I was interviewed, I was afraid that people might think that we were rich already and believe me I was very uncomfortable for being praised. I really wish they had asked how we were able to save that amount which is why I am posting this. The truth is we have been both fortunate and frugal. The fortunate part is that I have been able to hold on to a job at the same company for 23 years. I met my wife at the same company and she worked there a total of 9 years until she was laid off in 1995. We have no children and believe it or not my wife has not worked since 1999. I make an average engineers salary. We both contributed to our 401k never missing failing to contribute as a minimum the company match level of 6% of income and after 23 years between the contributions, company match, and the investment gains, the accounts have grown to a point that they are worth the bulk of the 700K. The remaining retirement assets are in Roth IRA’s. Not a dime of this money was inherited. We have also been very blessed not to have had any major medical issues or other financial catastrophes. The frugality did however require sacrifice and patience. Other than a mortgage on our home (small 1300 sq. ft.) we carry no debt and pay any credit card balances every month. We did not purchase our home until we were in our mid 30’s mostly because I had wanted to have a good chunk of a down payment and to be able to afford the mortgage on my income alone. We had a very small wedding and have not spent large amounts of money on luxuries, vacations etc. I have only owned 2 new cars in my lifetime and drove the first, a 1995 Honda Civic, for 15 years. All of this sacrifice does of course have a downside and if we don’t make it to retirement we may have missed out on some experiences, but neither of us care a lot about material goods and even less about “keeping up with the Joneses” . To me, the best thing we did was to start saving early, keep saving, and be patient. In 1992 my 401K was worth 10K, in 1997 70K, 2002 160K in 2007 400K…the power of compounding interest. Lost nearly half in the downturn, but we did not panic and it came back to a point where we are now at all time highs again.

Hi Modulation! Thank you for posting this. I really appreciated the information. With all that, you definitely deserved the congratulations, but I also thank you for what you wrote about being blessed. May you live long and enjoy what you have accomplished!

While I am happy for the man and his wife who have $700K, I felt uncomfortable with the way he was praised for how much he had. We don't really know how he got there - was some of it inherited? Does he have a high paying job? If he makes $3 million a year, would it still be impressive that he's put aside $700K? The praise should be for the acts of saving and thinking about what you do with your money, not the numerical amount. I'm pleased with the money we have in our cds and are saving into our roths, and I'm hoping it will be enough, but it would take us more than ten years to EARN 700K in income, and that's with two of us working.

This was a very informative segment. Everyone needs to remember to save for that rainy day. Those who had one and needed it over the past few years were saved by it. I was never a saver before I met my husband. The value of having that unsexy, low-interest savings account is priceless!

With Generous Support From...