Financial Planning How-To Guide: Create a Cash Cushion Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Oct 17, 2008 2 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Effective money management is more important than ever in these troubled economic times. Through our partnership with The Motley Fool, we are able to provide you with great personal finance articles that can help you jumpstart your financial planning and give you the actionable advice you need to address the financial crisis. Emergencies happen. You might as well plan for them. Whether it’s a temporary job loss or an unexpectedly high orthodontist bill, having some cash on hand will cushion the financial blow. Creating a cash cushion for planned expenses is a good idea, too. So to help you on the path toward financial stability, follow this four-step plan, and start saving! 1. Consider your risk and responsibility. Do you have extra mouths to feed or preschool tuitions to pay? Is your job stable, or is your industry going through a hiring lull? Your answers will help determine how thick your cash cushion needs to be. 2. Figure out your essential expenses. You’ve probably heard that you should have three to six months of expenses set aside for an emergency. That rule of thumb is a good starting point for your calculations, but you might need less than that — or more. It’ll take just 10 minutes to come up with your exact emergency savings amount. 3. Calculate your short-term cash needs. Your cash cushion also includes money you’ll need for expenses coming up in the next three, five, or seven years, depending on your risk tolerance. (You don’t want this money in the stock market. Trust us. Stock investments are too volatile to risk your short-term cash.) 4. Get the best return on your emergency savings. Mingling your emergency and short-term savings with your checking account puts your savings at risk. Instead, keep this money separate — and get a better return on your cash while you’re at it. Taking into account liquidity, interest rates, risk, and account costs — so you can find the best return for your bucks. Previous Post A Brief History of Government Bailouts Next Post Cost of a Safety Deposit Box & What to Put… Written by Mint.com More from Mint.com Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do They Cover? Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on Taxes Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? Financial Planning WTFinance: Annuities vs Life Insurance