Are You Filling Up Your Savings Buckets

According to a recent article, nearly one in three people (30 percent) in 2023 had some emergency savings, but not enough to cover three months of expenses. And nearly one in four U.S. adults (22 percent) said they have no emergency savings at all.

Building and sustaining savings is really our best strategy for avoiding debt because, without savings, we are likely to rely on credit when the going gets tough. Here’s a reminder of the “savings bucket” system we recommend at Sente, and some good rules of thumb for each bucket.

1. Emergency Savings—3-6 months of expenses
   This bucket is for the unexpected, like an unforeseen car repair or extended job search. How much to save depends on your income type. Salaried employees should generally save three months. Those with variable income—like a commissioned salesperson—should consider savings for six months of expenses.
2. Savings to Spend—50% of the targeted expense, like a new car or college education
   This percentage is based on how much you want to save in advance of the purchase. The more time you have, the higher the percentage you can save.
3. Savings for Retirement—The rule of 25
   Ultimately, your retirement savings target should be 25 times the annual expenses you expect in retirement

By embracing the power of savings buckets you can enhance your financial security. Your future self will thank you for it!