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