The savings rate is an important national economic statistic. However, it is even more important on an individual level. Whether it is a business or family, putting money away is key to staying afloat economically.
Of course, everyone will go through ups and downs financially. Whether that is poor investment outcomes, unexpected medical costs, fixing a car or unexpected legal costs for a law firm, there are always new things to think about. For that reason, putting savings away is always important.
Companies should generally put 10% of their revenue in a savings account or low-risk investment portfolio (like share certificates). These savings are put away in case of poor sales and economic turbulence that causes business to slow down.
Recessions are inevitable, and businesses must save for this eventual outcome. Unfortunately, during these periods costs don’t change, so the best thing to do is to use some of the hard-earned savings to get by and boost the business for a year or so. Then the company will be in even better shape and ready to take advantage of the return to regular economic activity.
Individuals and Families
In general, individuals and families don’t have the same luxury as businesses do in being able to increase income by selling more goods. Families are on a regular income that increases only with pay raises. Still, saving money is absolutely crucial in case someone is laid off or unexpected costs arise.
As a base, a family or individual should have three months of expenses tied up in a savings account. This includes the cost of rent, mortgage, car insurance, gas, car payments, food, day care, and other costs. Ideally, an individual should put far more than this number in a savings account, but this is a good starting point.
Georgia Heritage Federal Credit Union is a leading savings institution in the Savannah Metropolitan Area. For additional tips on how to save money or to learn more about the various savings accounts we have available, please contact us online or step into one of our credit union branches.