Preparing for the unexpected - 3 easy steps

Preparing for the unexpected - 3 easy steps

(ARA) - With mortgage expenses, car payments, pet costs and tuition bills, setting up a rainy day fund may not be your top priority. But let's face it - life doesn't always go as planned, and if you're not prepared, an unexpected financial situation - such as a major home repair or a lost job - could land you and your family in financial hot water. Do you know how you would pay for these expenses? A smart place to start is creating an emergency fund.

Experts recommend saving enough money to cover at least three to six months of living expenses, like your mortgage, groceries, and utilities, without resorting to things like high-interest credit cards or borrowing from your 401(k) account. While this may seem difficult, preparing yourself for an unforeseen emergency isn't as daunting as you may think. You can fund it over time, just like your retirement plan or a health care account, so it's there when you need it.

So where's the money going to come from? If you can't afford to start an emergency fund with a lump sum, don't worry. Saving on a regular basis is a way to help you accumulate funds toward your goal. You can even try setting aside your next tax refund or bonus from work as a start. Payroll deduction or monthly withdrawals from your checking account to your emergency fund are other ways to help you save. Since the deposits are made automatically, they can help you get in the habit of saving regularly. Follow these steps to get you started.

1. Create a budget: This will let you get a handle on current spending and expenses, and help you decide how much is right for you to save.

2. Determine where to put the money: You're not doing this to get rich, but to have money when you need it. Choose investment products that won't typically experience big swings based on the market, or bank savings accounts. Try to keep your choices liquid, with low fees. In addition, look for a financial institution that will reward you with bonuses or fee waivers for consolidating your finances with them.

3. Get access when you really need it: You want to choose investments and savings accounts that are easily accessible and do not charge a penalty when you need the money. Make sure to keep your emergency fund separate from your everyday accounts.

Creating an emergency fund can make dealing with unanticipated expenses much easier without sacrificing your long-term financial goals. The process doesn't have to be overwhelming if you remember a few simple steps - create a budget, determine where to put the money and access it only when you really need it.

For more information on emergency funds, visit merrilledge.com or speak with a Financial Solutions Adviser at the Merrill Edge Advisory center at (888) MER-EDGE (888-637-3343).

A five-step college savings plan for parents and students

A five-step college savings plan for parents and students

(ARA) - For students, being admitted to college is the result of years of preparation. Completing college prep courses, participating in extracurricular activities and accumulating community volunteer hours - all are important components to impressing college admissions boards.

While this hard work is essential, just as important is having a plan to finance that education. For parents with small children, reviewing the various college savings options and developing a plan to start saving now can help ensure the money is there when it comes time for college.

For parents of teens, it's a good idea to sit down with them to discuss the importance of saving for college. Chances are, they'll want to help contribute once they start earning their own money. In fact, according to the 2011 Annual College Saving Survey released by TD Ameritrade, Inc., saving for college is the top financial priority of teens age 14 to 19, and 68 percent of teens said they are saving a portion of their own money for college.

As college tuition costs continue to rise, paying for college today can be challenging.  Having a plan can help. Lule Demmissie, managing director of Investment Products and Retirement at TD Ameritrade, suggests the following five steps for developing a college savings plan:

1. Start early. Even if you can only afford to put a small amount aside, getting an early start allows your money to start working for you long before the first tuition bill comes. If you plan on having your student contribute, teach her why saving is important, and when she gets that first summer job, help with a plan to set a certain amount aside after each paycheck.

2. Set goals. Set a goal for how much money you would like to have saved by the time your student enters college. Then establish how much you would need to save each year to accomplish that goal. If you could use some help determining these goals, TD Ameritrade's College Planner allows you to plug in expected tuition costs and provides projected annual amounts that you would need to save to accomplish your goals. The website's WealthRuler can also help parents determine how college savings fits into the big picture of planning for retirement.

3. Select your education savings vehicle. Once you've set your goals, the next step is choosing the savings plan that will best help you accomplish them. Compare the features of popular plans, such as a 529 College Savings Plan, a custodial account or a Coverdell Education Savings Account. The IRS website provides information on the tax benefits of different types of savings plans.

4. Monitor your progress. By regularly checking on your savings progress, you can measure whether you are on track towards meeting your goals. This can also be an important learning opportunity for your student as you help him discover how savings plans work.

5. Consider asking for help. Enlisting a financial adviser to assist you with building a plan for investing and paying for college is one way to get help pursuing your goals. A professional can help you set a budget, as well as provide advice on college investment tools for your particular situation.

Investing wisely in your child's education helps your student focus on getting a quality education instead of worrying about how to pay for college. And when you and your child discuss a savings plan together, you're giving him or her a savings lesson that can be passed down to the next generation.