An emergency fund should be built into everyone’s budget. It’s a popular financial term, and most blogs touch on the importance of having one, but it’s a pretty simple concept if you’re unfamiliar. An emergency fund is money saved for unexpected expenses that pop up throughout the year. If something like this is new to you, consult your financial planner Orlando and continue reading.
Some experts say that, ideally, you should have enough money to cover 3-6 months of living expenses saved in your emergency fund. That’s pretty difficult if you’re just starting out on your financial journey though. Aim to set aside $1000 at first, because even though that also feels like a large number, when you look at the average prices of emergencies, you’ll be glad you have that money stashed away.
Okay. so you’ve been sticking to your financial plan and saving money. Your emergency fund is now enough to make you feel a little bit safer and less worrisome about future problems that may come your way. But where should you keep that money? Is a short-term CD the right place? It shouldn’t be cash under the mattress, right? Right. Your emergency fund shouldn’t be cash under your mattress. But to that point, it does need to be accessible. You should earn a little interest on it if possible, but with a CD, or certificate of deposit, your money is locked in for a specific time and retrieving it early will cost you and cause issues.
Instead of locking it away in a bank account that you can’t liquidate if a dreaded emergency does arise, why not find a high yield savings account instead. Most banks have this option now, and by utilizing it, you’re able to earn a little interest on your hard-earned-saved money, but you’re also able to get it quickly should an emergency occur.
The last, and perhaps best option yet, is to speak with your financial advisor about exactly where it is best for you to keep your emergency fund. Everyone is different and there are lots of potential good and bad places to keep your money. Talk to an expert and verify your choices or follow their guidance so you’re covered no matter what comes your way.