Divvy up your money in a way that makes sense to you -- even if it doesn't follow the rules. By Janet Bodnar, Editor-at-Large May 31, 2009 Americans have finally gotten religion when it comes to savings. After dropping to 0% in recent years, the personal-savings rate jumped to more than 4% early in 2009. Of course, that good news comes just as Americans are being encouraged to spend money to help lift the economy out of recession."So what's a patriotic American to do -- save or spend?" I wrote those words back in 1984, when the same conundrum presented itself. The answer: Do whatever's best for you. Assuming that Econ 101 hasn't been turned completely on its head (like so much else these days), people do tend to act in their own best interests -- especially if incentives don't push them one way or another. That's where we got off track over the past few years. With the country awash in easy credit, especially for home buying, the incentives were skewed toward borrowing. Sponsored Content Now, with so many people concerned about paying off debt and reining in spending, the incentives are tilted in the opposite direction. But eventually all those individual decisions should add up to an economist's beloved equilibrium. Advertisement Setting priorities Kiplinger's readers have more-direct questions about saving. "Okay," you say, "we're convinced. But where do we find the money to put aside, and how should we parcel it out? Emergency fund? Retirement? College? What about paying off debt?" The best way to save money is to have someone else take it right off the top -- through either a retirement plan at work or some other automatic savings program -- before it burns a hole in your pocket. That's the case whether you make $50,000 or $250,000. The standard rule is to put your money where you'll get the best return, which usually means taking full advantage of an employer match (if you still get one) in a work-based retirement plan. But I recommend that you divvy up your "pot" of money in a way that makes sense to you -- even if it doesn't follow the rules. Nowadays, for example, you get a psychological lift from having money in the bank, even at a relatively low rate of interest. And this may sound like heresy, but sometimes it's okay to ratchet back on retirement savings and pay off debt if it helps you sleep at night. Advertisement Let's say you make $80,000 a year and want to put aside a nice, round 10%, or $8,000. If your emergency fund is anemic, kick in $2,000. If your employer matches up to 6% of your annual salary, you could contribute up to $4,800 to capture the full match. Got kids? Add $800 to their college fund. Use the remaining $400 to fund a Roth IRA. But consider this alternative if you have high-interest debt: Set aside the same $2,000 for emergencies and $800 for college. Then cut back your retirement savings to $4,000 and put $1,200 toward paying off your credit-card balances. Every family is different, of course. But you can adapt blueprints like these to suit your needs. Top rates Wherever you put your savings, we'll point you toward top-yielding certificates of deposit and money-market funds. If you're willing to take a bit more risk, read Jeff Kosnett's Where to Find Top Yields. If your kids' college fund has taken a hit, Jane Bennett Clark offers valuable lessons on how to rebuild it. And get the Lowdown on CDs from Joan Goldwasser.