Putting Your Cash to WorkSubmitted by AssetGrade, LLC. on May 21st, 2019
Submitted by Kate Hennessy on May 21, 2019
As financial planners, we are always planning and finding solutions for our clients. One important part of any plan is to have an emergency fund. An emergency fund is a “sleep at night fund” that houses 3 to 12 months of your household expenses. It’s “the fund” that you never want to touch, but is there in the event of an emergency (loss of job, unexpected major home repair, etc).
For a number of years now, people invest their emergency funds in savings accounts at financial institutions that are paying just above 0% in interest. At AssetGrade, however, we have found a solution to allow our clients to optimize their emergency reserves in a better way. We do this by investing in a short-term bond fund that is conservative, while providing more yield than a typical money market account. Our clients’ funds are readily available in the event of an emergency and not tied up in certificates of deposit (CDs).
Our clients have found this attractive solution can be applied to other goals as well, such as saving for a down payment on a home or setting aside funds until they are ready to invest.
It’s important to remember to continue to keep the appropriate reserves in your emergency fund. Stay focused and optimize the reserves, don’t just “stick the cash under your mattress.” Re-visit the reserve amount every year to make sure you have the right amount set aside for emergencies.