Emergency Fund

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Motley Fool  Jun 22  Comment 
A growing number of Americans are finally getting wise to the importance of saving.
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New York Times  Jun 15  Comment 
In a highly unusual step the United Nations children’s agency tapped an emergency fund to help cover unpaid salaries, an official said, because “we’re not going to let kids die.”
Motley Fool  Jun 11  Comment 
Most Americans are disturbingly behind on emergency savings -- and it's a problem that'll only get worse if we don't change our way of thinking.
Motley Fool  Jun 11  Comment 
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New York Times  May 30  Comment 
Justin Bieber, Katy Perry, Miley Cyrus and Coldplay will join the pop singer at a show to raise money for the We Love Manchester Emergency Fund.
Motley Fool  May 24  Comment 
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The Economic Times  Mar 30  Comment 
Financial planners suggest building an emergency fund, which is a stash of money , kept aside to cover such situations.




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In life you should expect the unexpected, and this is why you need an emergency fund. The best you can do is to prepare for emergencies that require access to additional money and having an emergency fund is the ideal solution.

Financial emergencies can come in the form of a job loss, significant medical expenses, home or auto repairs or something you’ve never dreamed of. The last thing you want to do is be forced to rely on credit cards or a loan which could simply compound the problem.

==How Big Should Your Emergency Fund Be?== $100000.00

Most experts agree that you should keep between three and six months worth of your living expenses set aside in your emergency fund. Depending on your specific situation and whether or not you have children, carry substantial debt and types of insurance coverage will determine what amount is best for you. cash loans


The reason you want to have three to six months of expenses saved up is that the most common reason for the need of an emergency fund is due to a sudden loss of income. If you or your spouse loses a job you still have bills to pay and it may take a few months to find suitable new employment. It is best to plan for a worst-case scenario so that the smaller emergencies such as replacing the hot water heater that just went out will be easily covered.


Where should you store your emergency fund? bank account

You should be earning interest from your savings or you are losing value due to the effects of inflation, but this is not a priority for your emergency fund. Consider placing your emergency fund into a liquid money market account (MMA). Most of the time, MMAs will provide you with a special checkbook so you can have immediate access to your money in an emergency situation. It is not recommended to use your emergency fund to purchase certificates of deposits (CDs) or Treasury Bonds due to the lack of liquidity or early sale penalties. It is also not recommended that you use your emergency fund to purchase mutual funds, stocks, etc... Even though most are more liquid than CDs and Bonds, the risk and variations in the market are too great to entrust your emergency fund.

When setting up an emergency fund, you will want to open up a separate account so that the emergency fund money isn't mixed in with your regular spending money since mixing makes it much easier to spend the emergency fund money on nonemergency things.

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