editor’s note: I’m thrilled to introduce Mark Hooson, today’s guest author. He has sound advice that any family could use to their benefit, especially in these difficult financial times. Welcome, Mark!

It’s a clichéd sentiment, but balancing your family’s budget every month really can be a bit like walking a tight-rope – with little room for maneuver once your outgoings have been accounted for.

The logical thing to do then is to make sure your family has a ‘savings safety net’ so that if you are hit with any surprise expenditures, you won’t find yourself in free fall.

Some financial experts advise having a savings pot equivalent to three months’ salary in reserve so that you can afford anything that might crop up.

Firstly, three months’ salary seems like a huge amount to be able to put aside, and an even bigger sum to have just sitting in a savings account for a rainy day.

Consider the alternative though: if you found yourself too ill to work for a period of time, or if you were made redundant, how would your family continue to meet the financial challenges life throws at us?

Another area of your expenses which likes to surprise you is motoring. Of course you know how much you spend every month on fuel and insurance, but maintenance costs are not something you can really predict (unless you are a mechanic!)

Worse still, if you are unfortunate enough to be involved in an accident on the roads, you could find yourself with higher monthly car insurance premiums.

So, enough scaremongering – I’m guessing if you have read this far you get the point. A savings safety net could be invaluable in these situations – but how do you go about setting one up?

• First off, multiply your monthly income (before any outgoings) by three. This is how big your savings safety net needs to be. According to the US Census Bureau, median household income in the United States for 2009 was $50,221. If we take that average, and say the average monthly income is $4185, then the average safety net would be$12,600. Of course this is just based on median figures, and your safety net should just be three times your monthly salary.
• Next, you need to do your homework on where to put your savings. Finding a savings account with the highest interest rate is the obvious place to start. You’ll want your money to be working as hard as possible for you, and a high interest savings account will give you a bigger return on your savings – helping you reach your target figure more quickly.
• Before you jump at the highest rate account you find, you need to read the small print to find out what restrictions and conditions it carries (if any.) Some accounts don’t allow withdrawals within a set time period, and others penalize withdrawals.
• Finally, leave it alone! Not dipping into your savings will get you to your target faster, and makes sure you have the full target amount available for when you really need it.

You can’t predict what financial surprises family-life will present you with, but at least with a savings safety net you can be a little more prepared for a hypothetical rainy day, and have some peace of mind in the meantime.

Mark Hooson writes about debt, savings and credit for Money Supermarket.com

Image courtesy of hojusaram via Creative Commons license, some rights reserved.

Earnest Parenting: help for parents who want to be financially secure.

Tags: budget, emergency, finances, parenting help, planning, savings, wisdom