What do you consider savings?

[Ashley01]

Your suppose to save 10% of your income but what do you consider that 10% to be? Just money you put strictly into a savings account? Or would the 10% be broken into emergency fund, savings, Christmas, car repair, misc savings, car savings etc. Or should 10% be strictly savings and then the other things come out of the left over 90% of your income? I really hope this make sense!

[nuisance26]

~Well, that's a good question. I think everyone should save a lot more than 10% of their income though so I'm thinking that 10% would be retirement only.
Christmas and car categories are things you're going to spend the money on so they aren't so much savings as "Funds". So they definitely come out of the 90%. Anything you're saving to spend in the near future isn't actually savings.
What financial plan are you following that suggests 10%?~

[khaski]

I agree. General 'Savings' is for unexpected emergencies, like a job loss, illness, any unexpected major expense. I have other 'savings', like my 'car savings' that we add to in order to purchase our next car. Retirement is separate, I don't really consider it 'savings' as I won't be touching it for another almost 40 years! As for 10%, I would imagine that's for emergency savings, until you have at least 6 months of living expenses saved...or perhaps towards retirement, if your emergency savings are already complete, and have been saving a decent chunk for your age all long.

[miss_cas]

If you are just starting out or are starting over, the 10% savings contribution is awesome. Even 5% is grand as long as you are making regular and planned contributions after a couple of months.

The easiest approach is with a split direct deposit by an employer so you won't even have to deal with moving money or noting it in your check register. A planned bank transfer to savings is alright if direct deposit isn't available.

I totally recommend scrutinizing your spending habits. You may need to write down what you spend for a couple of months. Note the manicures, pedicures, expensive hair appointments, movies out + concessions, drinks out, eating lunch out at work, daily coffees out, etc. What would you not miss at all or would be happy just treating as a weekly or monthly indulgence?

This approach will usually get you 10% savings of net pay easily within a month. Next month, test to see if you have the same amount in your savings at the end of the month with the same changes to your habits. The third month, move over this amount monthly or 1/2 with each biweekly pay check as soon as you get paid.

It is fine to dip into this savings if you have an unexpected expense such as car or home repair. I highly recommend this approach if you use a credit card for most purchases and plan to pay it off in full every month. It won't cost you a thing with a no annual fee card and can earn some cash back with certain cards.

Lastly, when you have a pay increase, increase the amount you transfer to savings or 401k/IRA money. Also see how creatively you can change some of your other habits to save more money and adjust your savings accordingly. This is how you can grow into a 'freedom account' or savings for specific purposes. "Freedom account" is 1/12 your annual or biannual expenses such as car insurance, property taxes, planned car maintenance, car tags and planned home maintenance so the money will be available when the expense arises.

Regarding 401k, I like Suze Orman's new idea of putting enough money into your employer's 401k to get the company match and only this amount. Save as much as you can to invest in a Roth IRA on your own. Reason, some company stock options are lucrative but you shouldn't put all your money into one investment. You need to diversify. Traditionally, the rest of an employer's limited 401k options are very poor performers so you are better off choosing your own investments with an IRA. Yes, you will have to put the IRA contributions into a savings account until you have saved the required amount to purchase the fund, usually $3k. Some IRA investment companies will also charge you a service fee if you try to send a check in monthly so quarterly deposits are best. This money goes into the savings account until ready to send to the investment company. There are some IRA funds that allow withdrawals from your checking account monthly but you might find the additional fees will totally wipe out any dividends the funds pay.

Suze Orman also says dividend paying funds are the best funds - these are called exchange traded funds. These funds pay regular payments to you which you should reinvest until retirement age.

You are best off with at least 6 months of living expenses in your emergency fund.

[Sophiasmama]

We do 22% of our take home pay...this is only RRSPs...I don't include the RESPs or gift budgeting...but any money not 'spent' is saving.

[carrie loves bron]

In the Tightwad Gazette she would put money per pay check into a savings. When that reached a cetain amount then she transfered the extra over to another kind of savings that she needed in her buget. Then when that reached a certain amount then she moved the extra to another area. I would say the exception to the rule is retirnment. I am new to frugality so this way of going about it seems simple and easy to me.

[forHISglory]

I would recommend retirement savings and then some kind of account for all other types of savings. Retirement savings would be an account, perhaps through your employer, a 403b or 401k, or a pension, that you don't touch until retirement. But you also need another set of funds that are there for those car emergencies, those planned vacations, etc. It operates as an "in and out" fund (hopefully more in than out). As far as the 10%, I would put every penny allowed by law into your retirement fund, and then put 10% into the other fund.

[ncarr]

I have separate savings and retirement accounts

[OOwl]

I have a savings account that my fully funded emergency fund is going into (20% of my salary as direct deposit and ANYTHING I have left after bills/urgent care items). After that is funded, everything else is going to my retirement account. I need to play catch up in the IRA, after a few years' concentration on the snowball. Hopefully, it will be enough in 20 years when I retire.

[Telephus44]

For me personally, here's what I consider savings:

*Money put into retirement accounts (401K, Roth)
*Money put into DS's 529 account
*Money put into savings accounts (regardless of how and when it gets used)
*Money put into other investments
*Money I put towards extra mortgage payments (if I pay another $100 this month, or something)

I realize my definitions are different than others, but that's what I consider savings.

[mndtrp]

Any money you don't spend is considered savings. If you are asking what I then do with the money I don't spend, there's several answers, as there are several savings accounts.

1) retirement
2) emergency
3) large purchases - vacations, furniture, major repairs/projects
4) smaller, nonmonthly purchases - auto insurance/maintenance, home maintenance

The first savings account is set up through my employer. Once some debts are paid off, more will be set up myself.
The second is a savings account with our determined amount for emergency coverage.
The third and fourth are contained within one single savings account, separate from the previous two.