Courtesy of Pam Martens.
The Financial Industry Regulatory Authority (FINRA), the self regulatory body that oversees Wall Street firms, has an Investor Education Foundation whose aim is to boost financial literacy and warn folks about investment scams.
Earlier this year, FINRA put out an advisory titled: “Weathering Tough Economic Times – 12 Tips for 2012.” I have to take serious issue with one of their recommendations.
Tip number one from FINRA is to set up a rainy day fund: “Set aside at least one month of your current salary (and work your way up to three months) in a federally insured savings account. This will give you a cushion to handle medical bills, a short job loss, a surprise car repair or other financial emergency – and help keep your finances under control.”
A backup savings account that will last for three months is more like a brief shower fund than a rainy day fund. It’s certainly not adequate for the kind of Perfect Storm the economy is currently witnessing.
Data for November 2012 released by the Bureau of Labor Statistics shows that the average length of unemployment was 40.1 weeks, down just slightly from the 41.1 weeks registered in November 2011.
The personality of the individual seeking work, his or her age, and whether that industry is hiring or downsizing can also impact the duration of unemployment. A single individual obviously needs a rainy day fund to cover a longer period than a two-wage household where it is less likely that both would be unemployed at the same time. A household with hefty monthly mortgage payments needs a heftier fund than a household with no mortgage.
…
