Personal Finance Universe

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Saturday, January 19, 2008

Don't You Wish You Have An Emergency Fund Right Now?


save rainy day

Doesn’t it seem much more important to have an emergency fund now that people are talking about the US going into recession? Something that’s often neglected as a benefit of having an emergency fund is actually the piece of mind of knowing that our standard of living won’t be jeopardized if we lose our jobs.

Having an emergency fund will also give us freedom to look for another job if we unfortunately get fired. Imagine someone who lives paycheck to paycheck getting fired. How will he or she keep up? It wouldn’t matter what the former lifestyle is because there is no way he/she can pay another bill. This means that the person is forced to find a job immediately and the chances of finding a good one diminishes drastically.

Some might feel that emergency funds are not important because they’ve never used it. Actually, the fund is never meant to be used. It is just a safeguard just in case something happens and cash is needed quickly. The fact that the fund has never been withdrawn shows how lucky the person is because they never needed that cash.

With a stock market that seems to go lower daily, the emergency fund also acts as a form of diversification of our assets because emergency funds are supposed to be kept in safe investments like money market funds or even online saving accounts. Actually, I bet many people wishes much more of their assets are in their online savings account instead of being in the stock market!

So how many of us actually have emergency funds already? If not, what are you waiting for? There’s no perfect moment to start so now is a better time than any!

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