Are You Concerned With Your Emergency Cash Stash?
An emergency fund is a necessity in these economic conditions. Although many of us feel like we cannot afford to have an Emergency Fund the fact of the matter is that you cannot afford not to have one. According to the experts your ER Fund should be anywhere from 3 to 6 months worth of living expenses. The problem with that statement is that no one defines living expenses. We live in an age of excess so our typical living expenses could be and should be reduced. Living expenses should include house or rent payment, automobile payment, utilities, and food; that is it! (We should get rid of all the nice to have’s and just save for the need to have’s.) It will be tough but it will be necessary and a whole lot easier to save for.
Where should you invest your cash now that you have it? Well it is pretty simple. Don’t! Since it is an emergency fund you will need quick access to it. You do not want to tie it up in any type of timed deposit or risk adverse investment. Earning interest is not the primary objective for these funds ease of access is your concern. Here is what we suggest:
- A Savings Account not at your primary financial institution; you will want online statements and no card access to this account. In fact, you may want to have this account with a place that has a small number of branches.
- A Safe Deposit Box not at your primary financial institution; the government does not have a problem with this as long as you pay your taxes. Remember cash is king and as long have it you can be King!
Remember diversification still applies to your emergency fund; you will want to split your reserves into at least 2 different places.
Good Luck and Good Savings!