| You've been diligently setting aside | | | | Do you prefer the safety of savings over |
| money every month to cope with life's | | | | riskier investments? Emergency funds |
| unexpected events, and then one day it | | | | exist to keep us feeling safe. The money |
| occurs to you that your emergency fund | | | | we save in them gets stashed someplace |
| might be getting too big. | | | | very safe. All of this safety can make |
| Can that happen? It's a question that | | | | you feel, well, pretty safe. But it also |
| one Fool recently posed to the Fools and | | | | comes with a cost. Money invested in the |
| Their Money discussion board. And the | | | | stock market stands a pretty good chance |
| question elicited some good advice from | | | | of outperforming the yield on your |
| fellow savers. | | | | savings or money market account over the |
| The general recommendation suggests that | | | | long haul. It's riskier, but you stand |
| everyone should have at least three to | | | | to gain more. You'll want to balance the |
| six months worth of expenses saved | | | | goals of short-term safety and long-term |
| someplace safe but easily accessible, | | | | gain. |
| just in case of job loss, major medical | | | | Has your e-fund been on autopilot? If |
| emergency, or natural disaster. It's up | | | | you've been automatically funding your |
| to each individual to tweak that | | | | emergency fund every month for a long |
| suggestion to fit his or her personal | | | | time without paying much attention, it |
| circumstances. | | | | might be time for a reassessment. Remind |
| If you've ever been knee-deep in an | | | | yourself of your original goal. Ask |
| emergency, you may wonder whether it's | | | | yourself whether your circumstances have |
| even possible to overfill an emergency | | | | changed enough to warrant revising the |
| fund. Unfortunately, you can't really | | | | goal. Then, see whether you've reached |
| know whether you've stockpiled enough | | | | your target. |
| until something actually happens. | | | | Do you have a better use for the money? |
| At a certain point, however, your | | | | Being dogged by creditors while trying |
| emergency fund will get big enough that | | | | to find a new job in a shaky economy |
| you'll wonder whether you can put some | | | | isn't anyone's idea of a good time. In |
| money to better, or more profitable, | | | | preparing for a potential emergency, you |
| uses. When you start pondering whether | | | | may want to include paying off some of |
| you have enough or even too much, it's | | | | your debts, such as car loans or student |
| time to look at the bigger context, | | | | loans, so that you have one less thing |
| several Fools at the board said. | | | | to worry about in the event of an |
| If your emergency fund is the only | | | | emergency. Or you may want to factor |
| financial asset you have in case of a | | | | your debt payments into your emergency |
| serious or long-term financial problem, | | | | savings plan. |
| you may be better erring on the side of | | | | Has your financial, family, or work |
| having too much. The financial | | | | situation changed? When building an |
| consequences could be more dire if you | | | | emergency fund, we typically plan for |
| started to run out of emergency funds | | | | the worst-case scenario. If you have |
| without any alternatives to fall back | | | | children, if your chosen profession |
| on. | | | | seems unstable, or if you have a lot of |
| If you have a pretty big portfolio of | | | | financial commitments, you may want an |
| assets, such as a home, stocks, or | | | | extra margin of safety with your |
| mutual funds, you may feel pretty secure | | | | savings. All those situations can |
| keeping just enough money in cash or its | | | | change, though. It may be time to |
| equivalent to cover minimal expenses for | | | | reassess once the kids have left home, |
| those three to six months. Although it | | | | you've paid off the house, or you're no |
| might not turn out to be ideal timing if | | | | longer worried about a job loss. |
| you're forced to borrow against your | | | | Can you sleep at night? Though hardly a |
| house or liquidate your investments, you | | | | scientific yardstick by which to measure |
| at least have that option if things turn | | | | your emergency savings, it may be the |
| out to be worse than you'd hoped. | | | | most important. You'll want to be able |
| You might also ask yourself these | | | | to rest assured that your emergency bank |
| questions when trying to determine | | | | account will provide enough if you need |
| whether you've overfilled your emergency | | | | it. |
| coffers: | | | | |