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That’s a tough question.  It isn’t how much money do you have.  It is how much money should you have.  The answer ranges anywhere from three months income to twelve months income.

I have heard some advisers suggest that every person or every family needs to have three months income tucked away in a savings account in case that rainy day arrives.  Most suggest that we have six months income in our rainy day fund.  Suzie Orman suggested recently on Oprah that the savings backup fund should be eight months of income.

Chances are if you are like most of us, you would have to stretch to get the three months of income into a savings account.  But, I suggest that each of us without a savings account (liquid cash) immediately open a savings account.  For those of us who are just starting to save, we will start with cut backs on spending until we get the first three months income into the savings account.  I will go beyond Ms. Orman’s suggestion and say that I believe we need to have a full year’s income in a savings account or CD.

Why do I suggest more than anyone else?  The answer is simple.  In the first place, most of us don’t have three months income tucked away.  It is time to develop a habit of saving.  The bare minimum to save is 10% from each pay check.  That is the bare minimum!  So, one you start your savings plan, why stop short?  Save a full year’s worth of current income.

It will be easier to do once you make saving a habit.  But, there are other reasons I suggest that we expand our rainy day.  We have all seen the near collapse of our economic structure these past two months.  Unemployment is on the rise.  Inflation is hitting everywhere and everything.  In fact, my grocery expenses have gone up some 20% on a few selected regular purchases since June.

We don’t know how long the economic crisis is going to last.  We don’t know how unemployment will affect us or if it will.  We don’t know if inflation will continue to climb.  With all the uncertainty in our economic futures, I strongly suggest that each of us strive to save an amount equal to our annual income.

This should be a priority goal for anyone who does not have a back-up savings account.  The best habit one can develop to achieve this goal is to save 10% of your income.  Pay yourself first. 

Imagine that!  Pay yourself first.  Take the first 10% of your check each month and pay yourself.  This should be a #1 top priority for everyone.  Take a little time to see how you can manage your family budget if you take the first 10% for yourself. 

It doesn’t take a mental giant to see that this idea of saving 10% should become a life habit. Instead of living beyond your means on credit card debt, plan on living on 90% of your annual income.  It may take some cutting back here and there, but I do believe it is something that every one of us can do.  I know we should.