Emergency Funds

Emergency Funds

Why you need emergency funds

How much do you need?

Where should you keep these funds?

Why you need emergency funds

Avoid using costly credit cards when emergencies arise

Reduce your insurance costs

If you have a fund to pay for insurance deductibles you can save on insurance premiums

Peace of mind

How much do you need?

Three months worth of expenses if you're in a fairly normal situation

Six months worth of expenses if you're in an unstable situation (seasonal business, possible layoff)

Where should you keep these funds?

Money market mutual fund or short-term bond fund

Short-term bond fund

Will pay a little more in interest

But realize that the short-term bond fund is subject to slight fluctuations in share price and you'll have a taxable capital gain transaction each time you sell shares