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The Savings Habit
By John Watson

When I was young my dad always taught me to put away part of my money and "Save for a rainy day." At the time I didn't exactly understand what he meant by "a rainy day", but I do now. You never know when the car is going to break down, the refrigerator quits or a hundred and one other little accidents will happen that you will need extra money for. If you have extra money put aside you can shop around for the best deal, pay cash for it and save a bundle in interest.

I have since been told by other sources that to be on the safe side you need savings put away to equal six months salary. This should be liquid savings, not stocks, bonds etc. You need to be able to access this easily in case you lose your job or some other catastrophe strikes. This will be considered your short term savings.

Dad also told me, "Son, you are going to get old someday and you are going to need some money to live on." This is what is considered to be long term savings. This would be best invested in stocks, bonds or mutual funds. A good financial planner could help you select the ones earning the best interest at the time you are ready to invest. Some financial analysts are saying that people are not saving as much as they used to. That seems strange, since most people are earning more now than they ever did, so let's see if we can find a reason for this.

#1. Our population has become too materialistic. Everything imaginable is advertised on TV, in newspapers etc. with little or no down payment and easy monthly payments. Everyone wants instant gratification, they cannot wait long enough to save the money for what they want so they buy on credit. The finance people love you for this because it is making them rich. After going deeper and deeper in debt you have no money left to save. #2. The government has instituted various welfare programs to take care of you in case of catastrophic illness and some unemployment in case you lose your job. They also have Social Security to take care of you when you retire. Well, guess what. That will only take care of the bare necessities, there
will be none left over for enjoyment. Just ask someone who is trying to live on Social Security. Also, the government says that the Social Security Trust Fund could run out in another twenty years. Then What?

#3. There is an underlying belief among some that the earth is about to self destruct. Everyone from the environmentalists to some religious sects are predicting total destruction of the earth, therefore no future and no need to save for the future.

There have been doomsayers all down through history and none of their predictions have turned out to be true. So, what if the current predictions turn out to be wrong and you do live to a ripe old age? What will you do then? Live on Social Security? What if there is no more Social Security?

If you do not already have a savings plan started, now will be a good time to consider starting one. A good amount to save would be 10% of your take home pay each month. It would also be good to put half of this into an investment such as stocks or a mutual fund.

So you cannot afford to put 10% into savings right now? Put whatever amount you can afford if it is only 10.00 per month. Get the savings habit started and increase it as you are able. As you see the money start to accumulate you will be proud of yourself for having the integrity to put aside the extra money and you will want to put more money into savings as you are able.

May you have a long happy and prosperous future.

John Watson

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John writes a weekly colum,n for his hometown newspaper. You may read some of his stories at: http://go,to/backfence You may contact John direct at: backfence@www.com