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6 types of savings: When to begin each

Getting started can be the hardest thing about saving money. This may be because the things you save for are often years in the future, and therefore it is difficult to feel a sense of urgency about them.

To make the need to save feel more urgent, here are some guidelines on when certain key types of savings programs should begin.

1. Your emergency fund

The most likely emergency to hit you is the loss of income, so the time to start preparing for that possibility is as soon as you have something to lose. One reason people find starting to save so difficult is that they do not want to give up the spending power they have become accustomed to. Therefore, if you start saving from your very first paycheck, it will seem like less of a sacrifice, since it is hard to miss what you never had. It will take time, but shoot for building up an emergency fund equal to six months worth of expenses.

2. Your workplace retirement fund

Continuing with the principle of not missing what you never had, a good time to start contributing to your employer's retirement plan is when you get your first raise. Set aside a portion of that raise, and all subsequent raises, and you will be saving for retirement without ever taking a step back in available income.

3. Your IRA

An employer's retirement plan is often a better place to start saving than an IRA because some employers make matching contributions, plus a well-run plan may give you access to a more attractive range of investment options than you would be able to get on your own. However, if you reach the point where you max out your allowable retirement plan contributions, the time may be right to save additional amounts via an IRA.

4. Your home's down payment

This process should begin as soon as you start seriously considering buying a house, and the amount you save each month should mimic the amount you would have to put into a mortgage payment. Consider this a dress rehearsal for when you will have to make those payments month after month.

5. Your child's 529 plan

The tax advantage of these education savings plans is based on their investment earnings, so the longer you have the plan, the more you benefit. Therefore, the time to start one of these plans is as soon as you start having kids.

6. Your burial trust

This is money set aside to cover expenses associated with your funeral and burial. A key benefit is that the money in these trusts does not count against you in terms of Medicaid qualification rules -- and going on Medicaid often becomes a necessity for people who have to pay costly nursing home bills. So, a good time to set up a burial trust is if you are thinking of going into a nursing home, so you can put the money aside before your assets have been depleted.

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