I\'m a bit of an Android rookie, and I just upgraded to Android Studio 1.2. When I make a new project (API 16: Android 4.1 (Jelly Bean)), I immediately get the following war
You can change the default encoding settings for new projects by clicking on File -> Other Settings -> Default Settings.
Under "Editor" and "File Encodings" you can set IDE Encoding and Project Encoding to the same value to avoid getting the error message with future projects.
Setting it under File -> Settings will change it just for the currently open project.