emergency fund

Thursday’s need-to-know money news

June 11, 2015 By Liz Weston

Today’s top story: Money moves that could kill your retirement. Also in the news: How to stress test your budget, how to build long-term wealth while renting, and how to prepare your parents for financing their long-term care.

9 Money Moves That Could Kill Your Retirement
Avoid these at all costs.

Stress-Test Your Budget with a “Financial Fire Drill”
Putting your emergency plan to the test.

How Renters Can Build Long-Term Wealth, Too
Investment alternatives can help.

Steps to Prepare Your Parents for Financing Long-Term Care
How to have a difficult conversation.

Wednesday’s need-to-know money news

January 28, 2015 By Liz Weston

Today’s top story: How to boost your emergency fund. Also in the news: What you need to worry about for retirement besides money, why you should worry about medical identity theft, and deciding when it’s time to dump your credit card.

11 Ways to Boost Your Emergency Fund
How to prepare for unexpected expenses.

5 Things to Worry About Besides Money for Retirement
There’s more to retirement planning than just money.

Medical identity theft: Why you should worry
And you thought credit theft was bad…

6 Signs You Should Dump Your Credit Card
Deciding when to cut the card.

This Simple 6-Step Routine Could Save You $30 Per Week on Groceries
An extra $1500 a year would be nice!

Thursday’s need-to-know money news

August 14, 2014 By Liz Weston

Today’s top story: Personal finance tips from big data companies. Also in the news: Why more seniors are being duped out of their money, the right amount to have in your emergency savings and ten ways to best spend $1000.

Three Personal Finance Tips From Big Data
Analyzing your spending habits.

More Seniors Getting Swindled Out of Money
Preying on some of our most vulnerable

How Much Is in Your Emergency Fund?
What is your emergency sweet spot?”

We asked a palm reader and a financial adviser how to handle our money
Who came out on top?

10 Smart Ways to Spend $1,000
And possibly double your money.

Why you want an emergency fund

January 20, 2014 By Liz Weston

Dear Liz: I regularly read about people in your column who don’t feel the need for an emergency fund, or think they only need a small one. This is one of the many issues that makes me glad that my husband takes care of the finances. We are both professionals with graduate degrees who, for different reasons, were once unemployed for three months at the same time. Because we had a healthy emergency fund, we kept up with our bills with only minimal belt-tightening. If I had been in charge we would have had to flee the country to escape our creditors! That’s an exaggeration, but you get my point.

Answer: Kudos to your husband for being prudent, and to you for cooperating with him.

For most families, growing a fat emergency fund necessarily must take a back seat to more important priorities, such as saving for retirement and paying off toxic debt, including credit cards. As soon as they’re able to add to their emergency savings, though, they should do so. The average duration of unemployment stretched over five months after the recent recession. Although you may be able to live off credit cards and lines of credit, using cash is obviously better — and having that fat emergency fund can help you sleep better at night.

Don’t invest emergency cash

December 23, 2013 By Liz Weston

Dear Liz: I always hear you talking about having an emergency savings fund. Most people that I’ve heard talk about this recommend keeping it in cash. I just couldn’t stand watching that money languish in a low-interest savings account, so I recently moved it over to my brokerage account and purchased a few exchange-traded funds. My wife and I are under 30 and we both have very stable jobs. We have adequate insurance (including a home warranty). We also have a $20,000 signature line of credit through our credit union in case of an emergency, in addition to multiple credit cards with high limits and no revolving balances. I feel that we are covered in case of an emergency with the credit line alone. Does all of this sound reasonable to you or should I go back to keeping my emergency fund in cash?

Answer: Lines of credit can be a reasonable substitute for an emergency fund for people who have more pressing financial goals, such as saving for retirement and paying off debt.

But there’s really nothing like cash in the bank for meeting life’s inevitable financial setbacks. Even seemingly stable jobs can be lost, and lines of credit can get used up fairly quickly. If these personal setbacks happen at the same time as a stock market downturn, your emergency fund could dwindle dramatically.

That’s why it’s best to keep emergency cash safe and accessible in an FDIC-insured bank account. You can squeeze a little extra return from the money by opting for one of the online banks that’s paying close to 1%. Trying to squeeze much more, though, increases the odds that it won’t be there when you need it the most.