We started a short-term savings campaign two years ago to encourage Fools to prepare for life's inevitable (often unexpected) expenses. Not only did you heed the call, but also you sparked a veritable savings frenzy across Fooldom.

Fools have been diligently saving their raises, extra earnings, and spare change and setting it all aside in safe, interest-bearing accounts. In fact, according to our Savings Center sponsor, MBNA, you, our Foolish community, are just a few bucks shy of reaching a significant savings milestone...

Half a billion dollars!

That's right. The community of people visiting this site on a regular basis has managed to collectively scrape together nearly $500 million smackaroos. Group hug, everyone!

For those who have their short-term savings in place, we jingle our jester caps in your general direction and shower you with motley praise. If you don't yet have cash at the ready to cover life's little hiccups, we offer the following CliffsNotes version of our 60-Second Guide to Short-Term Savings:

Everyone (yes, even you there in the eighth row) needs some short-term savings. By "short-term savings," we mean the money you'll need for emergencies and for big expenses you'll incur over the next three to seven years. What could happen if you don't have short-term savings? One of two very unfortunate things:

  • Emergencies or even should-have-been-foreseen expenses could spring a credit card trap on you that can take years to escape from. How Foolish it is to have the money you'll need soon safely accruing interest, instead of charging that valve job or honeymoon and paying double-digit interest rates on it for years.
  • To cover a sudden (or not-so-sudden) expense, you may have to sell assets, such as stocks, that were intended to cover long-term goals. Consider this all-too-likely scenario: You put all your spare money in the stock market and suddenly you need $2,000 for car repairs. Unfortunately, this happens during a time when the market is down, and you have to sell your stocks at a loss. Plus, that money is no longer invested, so you will miss out on future growth.

Avoid these unpleasantries by taking these five steps to establish your own cash cushion:

  1. Figure out how much you need to stash.
  2. Figure out how much you can afford to contribute each month to meet this goal.
  3. Pick the right place to put your money. (Hint: It's not under your mattress or in the stock market.) Check out high-yield savings accounts, money market accounts, or money market mutual funds.
  4. Comparison shop by looking at interest rates, comparable yields, account maintenance charges, and minimum investment requirements.
  5. Just do it. An automatic payment or transfer program can make it easy.

Congratulations to all who have taken control of your finances. We hope the entire community gets caught up in the savings frenzy. Visit our Short-Term Savings Center to learn more.