By BankingMyWay Staff

Consumers are tightening their purse strings, and the consumer-based economy is grinding to a halt as a result. The return to frugality may be bad news for the economy as a whole, but for individuals, it’s the surest route to long-term financial stability.

Collectively, our personal savings rate has declined steadily since the mid-1980s, from a long-standing average of about 10% to a record low of minus 1% in 2006. But the recent economic disaster was a wakeup call for many. Our savings rate was up to 2.4% in October and 2.8% for November, according to data from the Bureau of Economic Analysis.

The rise in personal savings is a step in the right direction. "The key to surviving the difficult times is liquidity," says Kathleen Piaggesi, a certified financial planner with K/A/P Planning Advisory in Scarsdale, New York. "The difference between the people in dire straits and the people that are making ends meet is that the former don't have enough liquidity."

<P/>Piaggesi suggests an emergency fund that covers three to six months of expenses, but she recognizes that six months represents a lot of money for many people. If six months’ worth feels out of reach, consider setting a target of at least four months before thinking about any type of discretionary spending. Paying off personal debt, such as credit cards and car loans, also should take priority over spending.

That emergency fund should be in an extremely safe, no-volatility account, such as a money market or savings account. It's a good idea to shop around for the best rates. Just remember that saving money even with no interest is better than not saving it at all.

Say you lived in Arkansas and were trying to find a money market account for your emergency fund. If you search for the best rate, you'll find that <B>People's Bank (PBCT) and Bancorp South Bank (BXS) offer accounts with a 2.5% annual yield. But the minimum balances on those accounts -- $2,500 and $5,000, respectively -- might prove too high for someone just getting started. Settling for the 1.75% annual yield from Timberland Bank (TSBK) with just a $100 minimum might be the better choice.

So forget what others might say about spending: Your first obligation is to your own finances. By all indications, many consumers are figuring that out.

To find rates in your area, search by entering your ZIP code on the CD section of BankingMyWay.com.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.