When I meet with people, one of the topics we discuss is "emergency fund" money. I ask a few questions, such as, “Do you have any funds set aside?”, “Where is it located?”, and, most importantly, “What would trigger you to tap into this account?”
Having a strategy for how to pay for emergencies is a key part of personal finance. That's one of the many reasons I want people to feel comfortable with their approach. I want them to understand that an emergency account can also help them move forward with a more comprehensive financial strategy.
As you can see from the accompanying chart, households appear to be committed to saving for a rainy day. Checking accounts and currency held by households is just a tick over $4 trillion, a steady increase from less than $1 trillion in 2019.
A comfortable amount of money in an emergency fund largely depends on a family’s situation. The fund can help pay for unexpected expenses, but it may also be flexible enough to cover other short-term needs. The important concept is to have a strategy and to understand the role the account plays.
If it’s been a while since we discussed your emergency fund, it may be time to revisit your approach. Remember, there are no incorrect answers to rainy-day fund questions. The only wrong answer is to go without an emergency expense fund, at all.
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.
