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Even a meager savings account will help keep debt away

$250 doesn't go very far. It might fix a car part or pay for a couple of trips to the grocery store but it's not going to pay your rent, mortgage or doctor bill. Still, it's a magic number discovered by an Urban Institute study that can spell financial security. A summary of their report says this: a household that has a savings account will be better prepared against hardship, even if the sum is as low as $250.

The article does not say that squirreling away $250 will save your home from trouble, but putting that first sum of money away builds a mindset to approach financial challenges that may be yet to come.

The Urban Institute highly recommends both a retirement savings account and a non-retirement account for when financial unpredictability happens. Layoffs are common in the modern era, a work injury can reduce income, as can being moved from full-time to part-time at a job. The study found that households that put aside funds from $250-749 could withstand greater economic adversity.

For those who have faced serious debt, maybe even bankruptcy, it offers a place to start rebuilding your fiscal plan.

Strategies for saving

Set goals

First, set a plan. While putting money aside for the simple sake of saving is a start, having monetary goals and a determined timeline make you more likely to contribute, as well as to feel a sense of achievement.

Automatic transfers

Most banks offer no-fee automatic deposits or transfers into a savings account. You can't spend money you don't see, right? Deduct a portion of each paycheck to go straight into a savings account.

401(k)

Many employers provide a 401(k) and many even match investments for the first one to five percent. If you don't take advantage, you're leaving money on the table from your employer. Plus, money put into a 401(k) is an early start toward retirement savings. If your company doesn't provide a 401(k) plan, look into IRA options at a local bank or credit union.

Put aside small bills

You've undoubtedly read several money saving articles over the years that suggest everything from coupon clipping to getting haircuts at the local barber college. One way to build up a nest egg is to put aside your small bills. Every time you get a $1 or $5 bill, stash it away. It's a new version of the penny jar, adjusted for inflation. Most people who practice this method save at least $1,000 per year.

Practiced in isolation, none of these techniques will prep you for early retirement but they'll get you onto firm financial ground for addition savings. Retirement accounts need firm planning, careful investment and a dedication. Before you can save for the long term, though, you need to pay today's bills while building a security net in case of emergency.

Urban Institute says $250 will make a difference, and most unemployment offices and emergency savings forecasts suggest having at least 6 months of living expenses on reserve. As you're climbing out of debt and reestablishing your credit and financial independence, remember that setting goals and looking forward is the most effective method. When it comes to finances, always think about the future.

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