Accessible Savings

• In general, you should try to have at least $1,000 in an accessible savings account. This money can help pay for immediate repairs if your furnace needs to be replaced or your car breaks down. It keeps you from having to turn to credit cards, cash advances or payday loans when something unexpected occurs. This cash should be in highly liquid savings so you can get it when you really need it, but you should also make yourself rules for when you are allowed to dip into it.
  
  

Job-Loss Fund

• Most financial experts recommend having money on hand to pay for your essential expenses if you lose your job. However, experts are divided about whether you should build up this savings before or after you pay off your high-interest debt. Dave Ramsay suggests just saving $1,000 and then paying off all debt except your house before saving a job-loss fund. The amount to save in this fund depends on your household's expenses. In general, you should have enough to pay for your bare-bones expenses for three to six months. This is your housing, transportation, groceries and insurance, but not all of the eating out, vacations and extra debt payments you might ordinarily make.
  
  

Anticipated Expenses

• Another type of savings account is one in which you are saving for an anticipated expense. For example, you might be planning to take a vacation next summer that will cost $1,500. Make this possible by saving for it each month between now and then. Calculate the amount to save by dividing the total by the number of months you have. If it is September, and you want to vacation in July, you have 10 months, so you need $150 per month. Multiply your monthly target by the number of months that have passed to find out how much cash you should have in that savings account each month. You can take a similar approach to save for holiday gifts, a new car, home remodeling or an electronics purchase.
  
  

Alternatives

• Some financial experts, including Liz Pulliam Weston of MSN Money, suggest relying on readily available credit instead of holding on to cash savings that you are unlikely to need. This is especially true if you already have a credit card or home equity line of credit with a large credit line available. Yes, it will cost you to borrow then, but in the meantime, you can use your money to pay off debt or make high-interest investments instead of having it sit in a liquid savings account that pays very little interest.