What is a savings plan? A savings plan is a plan that includes:
The reasons you are saving. This could include your goals, setting up an emergency
fund, money to pay for your automobile insurance in three months, money to cover the
months you are likely to be laid off due to seasonal availability of work, or to ensure you
have enough money set aside for back to school expenses. The amounts you need to save. This is the total amount of money you need to save.
You do not need to save this all at once. Your savings plan will help you come up with an
amount of money you can save each and every month to reach all of your savings goals.^6
How you are going to find that money to save. These are the specific strategies
you are going to use to find that money to save. Most people do not have unused income.
They have to make choices about cutting back on one expense (or more) to afford
something else. Or they have to figure out a way to get more income. Another strategy is
using direct deposit or transfer of a set amount into a savings account if you have a
regular paycheck. Tool 4: Increasing your income through tax credits explains the
Earned Income Tax Credit (EITC) and the Child Tax Credit and how they can help you
save for your goals.
Where you are going to put that savings. You have to work hard to save money.
You want to make sure you put it in a safe and secure place. An important part of your
savings plan is identifying specifically where you will put the money you have saved.6 While the target amount for an emergency fund will vary from person to person based on their needs, $500 to
$1,000 has been suggested as a starting point. See http://www.AmericaSaves.org.