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savings
I have a savings account that pays like 2% interest and a car loan that's costing me 6% interest. Obviously I'm not coming out ahead. I'm at the point now where I could basically empty my savings account into my car loan and be even all around, but I'm afraid to live life without that "safety cushion" of money in savings. How much should I have in savings in case something awful happens, like I lose my job? Is there a rule of thumb or is it just whatever I'm comfortable with?
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If you can pay off the loan, do it. The money your have been paying for the loan will be freed up for your savings. Eat ramen noodles, and save a few extra bucks before you empty the account.
The rule of thumb is the amount you should save is 1-2 months salary in case of emergency. It would be wise to consult a professional about money management if you can afford it.
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I think the standard, somewhat unrealistic answer is 3-6 months' basic expenses in the bank... if your employment situation's more precarious, I'd try to keep that level up. If it's more stable, whack as much of that car loan as you're comfortable with and build your savings back up. I live one month from insolvency as a working student, and I survive pretty well with a little help from my friends and family.
Debt sucks, get rid of it as fast as you can safely!
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Talk to your bank manager or an independant advisor. They'll be able to advise you confidentially and with a knowledge of your finances with the benefit of experience.
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