Released: February 23, 2007

For Financial Well-Being, Make Savings a Priority

MANHATTAN, Kan. – Waiting until the end of the month to make a deposit in personal savings, when you may be short on cash, can shortchange your financial future, said Carol Young, Kansas State University Research and Extension financial management specialist.

Saving regularly is key to building financial security, yet the U.S. Department of Commerce has reported personal savings in 2006 at at the lowest rate in 73 years, a negative 1 percent, she said.

“Saving regularly and working to put a lid on extra spending and manage your money successfully doesn’t need to mean doing without a treat or special-occasion spending,” Young said. In reality, saving is the very tool that can make special purchases and opportunities possible – including a newer, more dependable car or family vacation.

“To ensure savings, make it automatic. Pay yourself first by making a savings deposit before you begin spending your paycheck,” said Young, who offered these additional financial management tips:

* Track income and spending to identify the places where the money is disappearing. Make a list of net income and weekly, bi-weekly or monthly expenses. Include debt load and periodic payments, such as semi-annual car insurance or property tax payments.

* Next, separate expenses into two categories:

1. What are the must-haves? Housing, utilities, health insurance, food, transportation and clothing are examples.

2. What are discretionary or “nice to have, but not necessary” expenses? Entertainment, eating out, an extra sweater or a car with all the extras typically fall in this category.

* Cover the essentials first.

* Don’t go shopping unless you have a list of needed items. Stick to the list!

* Resolve to reduce – and eliminate – debt by paying off the highest interest loans first, while also meeting the mandatory payments on lower-interest loans, to avoid high fees.

* Set aside money for an emergency fund. While a minimum of one to six months’ expenses is desirable, as little as $500 can be helpful for such unexpected expenses as an accident or injury that compromises the ability to work, dental bills, additional transportation, or a plumbing emergency or other problem with basic services.

* Pay in cash or with a check or debit card (which can be used to deduct money from a financial account). A credit card with a balance available can give a false sense of spending power.

* Allow each member of the household some discretionary money, including allowances for children.

“It’s better for a child to learn from spending mistakes with a small, weekly allowance than to wait until he or she is a teen or young adult and unable to weigh spending decisions,” Young said.

All Kansas State University Research and Extension offices can offer a basic money management curriculum. Many Extension offices in the state are also emphasizing saving and spending strategies and financial management education as part of Kansas Saves, a program connected to America Saves -- an educational “Save and Reduce Debt” initiative sponsored by the Consumer Federation of America and other partners.

More information is available at any local K-State Research and Extension office or on Kansas Extension’s Web site: www.oznet.ksu.edu.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by:
Nancy Peterson
nancyp@oznet.ksu.edu
K-State Research& Extension News