One key to being a successful saver: asking questions. Liz Weston, personal finance expert, joins the show to be your guide for your questions and to explain the basics behind savings.
The U.S. savings rate is at 3.2 percent right now. What does that number tell us about the economy?
Weston: "We need to be saving a lot more. It does tell you that people are still struggling with incomes that just aren't keeping up, [incomes aren't] back to where we were in the late-90's. We've been losing ground all that time, and it is really tough for people when they don't have as much income and costs are rising.
Judy, a single mom from Eagle Rock, Calif., says she only has $10 left over to save after paying for her monthly necessities. What can she do?
Weston: "Try looking at your expenses ... see if you can get a roommate. But honestly, the better thing to do is make more money, get more income. There's great some resources for you, The Dollar Stretcher is one of the oldest websites that looks at frugal living, especially when it comes to groceries. That's probably where there's the most wiggle room in most people's budgets. But you can only cut so far, but it really is so easier if you're making more money."
Why are retirement accounts more important than emergency funds?
Weston: "It's kind of counter-intuitive until you understand the power of compounding, and how powerfully it can work against you if you don't take advantage of it. If you don't start saving for retirement by the time you're 35, it gets harder and harder to catch up, to the point that if you're trying to save in your 50s, you'll have to save half of your income to have any shot to not have a big drop in your lifestyle. The reality is, you probably can't catch up later. If you save adequately in your 20's and 30's, you've got a tail-wind behind you, and your life is going to be a heck of a lot easier."
To hear answers to questions like where to keep your emergency fund, and an explanation of different retirement accounts and which could be the best for you, click the audio player above.
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