Guide to Emergency Funds

I'm Jeffrey Breault of Carey, Thomas, Hoover, and Breault. As a financial advisor, I can't stress enough how important it is to have an emergency fund.

There are times when you invest that it's inconvenient to pull out your investment. With time deposits, you could forfeit any interest you had coming. With stocks, you might get caught when prices are low. Even if you're trying to sell a piece of property, the timing might just not be right.

That's why, no matter how excited you are to make your money work for you, it's always a good idea to have emergency funds that you can draw from on a rainy day. I like to tell my clients to have different tiers of emergency funds. Tier 1

Always have at least two weeks of salary or $1,000 in cash (or in your savings or debit account). This will be quick cash that you can grab on the way to the hospital or evacuation center in case of an unforeseen event. If a pipe bursts at home or you forgot to pay the power bill, this first tier fund would keep you above water until your next payday. Tier 2

If you run into more than just a rainy day, you're probably going to need a lot more than $1,000 to cover the expenses. Depending on factors like your health, the area that you live in, your income relative to your core expenses, you're also going to want to save anywhere from three to six months worth of salary for bigger emergencies with more lasting effects. These can include the discovery of a medical condition, loss of your job or another form of income, and major theft or destruction of property among others.

Before deciding how much to save up, always consult with a financial advisor like Jeffrey Breault to make sure that you're not setting aside too much or too little.


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