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Financial planners often counsel clients to keep up to a year's worth of living expenses in a fairly liquid savings account for emergencies.
Long-term joblessness, a major illness or the death of a partner could certainly chew up that hefty sum, but preparing for more common, smaller hiccups is important, too.
Linda Montgomery learned this in the hardest of ways when her husband died nearly two years ago after battling lung cancer.
The 63-year-old widow went through a personal bankruptcy brought on by her husband's medical expenses, losing ownership of the couple's condo near Atlanta. She relocated to Michigan to be near family, rented an apartment and started to rebuild, living on Social Security and pension income.
Then a slip and fall this winter stuck her with about $300 in charges for physical therapy that weren't covered by insurance. She was able to absorb the charges thanks to a service that let her stretch out payments without interest, but the experience reminded her how vulnerable retirees are to unexpected expenses.
"We never thought anything bad would happen. I wish we had put more into emergency savings," she said.
The trick, of course, is balancing the rainy-day fund with competing goals for everyday spending and retirement savings. And for those already in retirement, it's knowing how much cash on hand you need to have in order to avoid ill-timed withdrawals from retirement accounts.
Could finding a more personalized target for emergency funds help consumers make sure they are striking the right balance?
That's the thinking behind a new tool from HelloWallet, a unit of Morningstar Inc.
The budgeting software application provider analyzed two years' worth of spending on about 15,000 subscribers. Car and home repairs and health care costs accounted for most of the large spending spikes.
The tool asks users about their income and typical monthly expenses, their health insurance deductibles and out-of-pocket maximums, how many cars they own, whether they own a home or rent and how much they have in current savings.
Using that data, it projects suggested dollar figures to save for minor and major emergencies, as well as a job loss, based on the actual expenses its users incurred. These amounts vary depending on several factors, such as the person's number of dependents, health insurance deductibles and total income, and whether there is a working spouse in the household.
The goal is to help people get to the point where they can absorb minor emergencies, then build to where they could withstand a lengthy job loss, said Aron Szapiro, policy and finance expert for HelloWallet.
Many people, of course, struggle to save anything, so simply identifying how big an emergency fund should be can be an exercise in frustration. And as more people are subject to high-deductible health plans, large out-of-pocket bills from medical procedures are more common.
If you're still below target, be aware that there are some alternatives when emergencies strike. A home equity line of credit or a reverse mortgage are two options, and health savings accounts paired with high-deductible health plans offer tax incentives for putting away money for medical bills.
Montgomery used a no-interest payment plan through CarePayment, an Oregon-based consumer finance company that contracts with such health providers as hospitals. The providers pay fees to CarePayment to administer the payment plans. The company says it handles about 1.5 million patient accounts through roughly 500 health care facilities.
Larry Jones, 63, used the service to stretch out payments on more than $1,800 in medical bills related to a knee surgery last fall.
Jones retired from an insurance career with a pension, owns some investments and still works part time at a retail job to get the health insurance, but chose the payment service so he wouldn't have to liquidate investments.
"I can't see putting $3,500 into a savings account earning a half of 1 percent because I may need it to pay a medical bill," he said.
There's plenty of debate about how emergency funds should be invested, with some experts suggesting putting everything in ultrasafe bank accounts and others recommending a tiered approach that can incorporate bonds with lower-risk profiles.
Wherever you fall on the spectrum, identify your biggest risks and think about how you'd respond when disaster strikes.
Janet Kidd Stewart writes for the Chicago Tribune.