WASHINGTON – Tucking away money in savings accounts for emergencies is as critical to service members’ financial readiness as establishing retirement accounts, the director of the Defense Department’s Office of Family Policy and Children and Youth said here recently.
DOD officials encourage troops and their Families to have emergency savings funds for unforeseen contingencies, such as when a car needs mechanical work, a washing machine breaks down, or when out-of-pocket money is needed during a household move, Barbara Thompson said during a recent interview.
“You want to make sure you have at least $500 in emergency funds so you don’t have to look for financial assistance or a long-term loan to cover your daily expenses,” Thompson advised service members and their Families.
Troops and Families also are encouraged to have six months’ worth of salary earnings put away in case something disastrous happens, such as if a spouse loses his or her job, Thompson said.
“If anything catastrophic happens, you want to have enough savings to pay your mortgage and your big bills, because those are your life investments, and you don’t want to see any of them in jeopardy,” she advised.
“The more costs you have, the more savings should be in your plan,” Thompson added.
The plan, she added, should account for ongoing expenses, such as monthly car payments, and for occasional extra costs, such as putting a deposit down on an apartment during a move.
Just as important to a savings plan is living within one’s means, Thompson said. An important question when making purchases is “Do I need it, or do I just want it?” she added.
“If the answer is you only want it, (you should consider) putting that money into a savings account,” Thompson said.
By examining spending habits, living within a budget and saving for emergencies and unforeseen circumstances, service members gain another benefit: becoming financially resilient and prepared when they get out of the military and enter the civilian workplace, where they can be bombarded with spending lures such as attractive credit card offers, Thompson said.
“We’re hoping to stem the tide at DOD by getting in front of a financial crisis before it happens,” she said of the department’s effort to provide financial training to service members as early in their military careers as basic training.
Budgeting and saving requires discipline and the ability to stick to established plans, Thompson said.
“It’s important for couples to be on the same page (based) on what they want for their future,” she added, “and how to eliminate some of the luxuries they may not need to live a happy lifestyle.”