FINANCIAL FOCUS: ARE YOU SAVING ENOUGH? MOST AREN'

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

The economy is booming, unemployment is low and times are good. So why aren't more people saving?

The numbers are startling. Half of all U.S. households have less than $1,000 in accessible savings, according to a recent study co-sponsored by the Consumer Federation of America. And the personal savings rate of Americans has fallen steadily over the past several years. In 1999, we saved only about 2 percent of our disposable household income down from 8 percent as recently as 1992.

This downward savings spiral is not good news. Adequate savings are a vital part of financial security. If you don't have about six months' worth of living expenses saved up, then you may need to dip into your investments to pay for emergencies or unexpected situations. And when you're forced to tap into your investments, you're hurting their ability to grow for the future -- which means less money for your long-term goals, such as retirement.

To make sure you have the savings you need, try "paying yourself first." From every paycheck, put away a designated amount of money into a savings vehicle that offers safety and accessibility. To make it easier on yourself, have your bank deposit the money directly. You can, of course, put your emergency savings in a passbook account, but you may want to consider money market funds instead. These funds are highly liquid, and they pay a better rate of return than a basic passbook savings account. Furthermore, rising interest rates over the past several months have resulted in higher yields for money market funds.

If you are ever forced to reach into your investments to provide emergency funds, do so as carefully as possible. For example, you may be tempted to take out a loan from your 401(k). You can typically get the money quickly, and you'll be paying yourself back, with interest. Making this move usually isn't ideal, because you're probably better off leaving the money in your 401(k), where it will grow on a tax-deferred basis. On the other hand, taking out a 401(k) loan may make more sense than liquidating a growth-oriented mutual fund. This move can be especially harmful if your fund's value happens to be temporarily down. As a general rule, you don't want to sell mutual fund shares when the price has fallen sharply.

You also may be able to get emergency funds form other investment vehicles. Some types of insurance policies have loan provisions, and you can make tax-free, penalty-free withdrawals from your Roth IRA under certain circumstances.

All things considered, however, you'll always be better off if you can avoid using your long-term investments or retirement plans to pay for short-term cash emergencies. So do whatever you can to build a cushion for yourself. And the best time to start saving for that "rainy day" is when the sun is shining.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.