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Portfolios 104: Building an Emergency Fund

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1.
Why are stocks not considered a good parking place for emergency funds?
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The stock market is volatile. It is possible for the price of your stock to be down when you need the money to cover an emergency expense.
2.
Should you ever consider adding additional money to your emergency cash fund?
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Yes. If you receive a bonus or raise at work, you should try to add money to your emergency cash fund, before you get used to spending the extra money. You might also consider looking for ways to trim your monthly spending, in order to add to your emergency cash fund.
3.
How much money should you keep in an emergency fund?
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Your emergency fund should cover daily expenses for a period of three to six months at the minimum. If your income fluctuates, or if you're self-employed, you'd be wise to have more emergency cash on hand.
4.
An advantage to using an automatic savings account to build an emergency fund is that it _______.
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Saves you time and energy on finding money to save. Putting your saving on automatic can free up time for other financial planning.
5.
Where is the best place to keep an emergency cash fund?
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Keep your emergency cash fund in a savings account or money market account. These types of accounts are the most accessible in case of an emergency.