If you were to lose your job or decided to quit your job, it’s important to know that you and your family would be alright, at least for a time. We’ve all heard before that we should have an emergency fund, but is that all we should be after?
Everyone has a different opinion on what an emergency fund should be. Some want to have just a little cash on hand in case the refrigerator goes out or the roof springs a leak. Others, myself included, choose to put away an amount equal to so many months of expenses. I’m after one year’s worth of expenses.
Too often the focus is on maxing out a 401k or fully funding an IRA. These are great goals, but not at the expense of your short term liquid savings. Having a sizable cash base gives you options, make no mistake about it. An emergency fund could also be renamed a security fund.
I’m not going to belabor this point, but I do think it’s important to have access to enough cash in order to maintain your standard of living for a period of time. That period of time is up to you. I’m going for one year. I don’t think that one or two months is enough, but ultimately it’s for you to decide what you’re most comfortable with.
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by Fiscal Musings » » In Case of Emergency…, on February 6 2008 @ 5:45 pm
[...] always a lot of talk in the realm of personal finance about emergency funds. How much should one have? Where should one keep it? I’ve talked about these before on this [...]
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