Archive - October 1, 2008

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How Should You Invest Your Emergency Fund?

How Should You Invest Your Emergency Fund?

Having discussed why having an emergency fund is a good idea and how big an emergency fund needs to be, I’d now like to talk about investments suitable for an emergency fund.

Generally speaking, some part of your emergency fund needs to be in a liquid, readily accessible investment whose value does not fluctuate much.  An emergency fund invested entirely in your employer’s stock would therefore be a really, really poor choice.  Typically, emergency funds are invested in savings accounts, CDs, money market accounts (taxable or tax-free), or Treasury bills/notes/bonds.  Where bank deposits are used, they should be FDIC-insured.  …

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