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Portfolios 104: Building an Emergency Fund

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1.
You will likely need an emergency fund most when you're not financially stable.
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True. People who are just starting out are usually most in need of such a fund.
2.
A retirement account is not a good candidate to hold an emergency fund.
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True. Retirement accounts require years to build up. When you take money out now, you can lose a lot of growth in future years.
3.
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.
4.
When starting an emergency cash fund, it's always best to start with a high amount.
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False. If you don't get a windfall, you can set aside a comfortable amount, such as 5%. You can always add to it later.
5.
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.