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