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How to set and invest your emergency fund
Morningstar recommends three to six months of expenses in liquid, FDIC-insured accounts to protect savers from income loss and unexpected costs.
- Morningstar outlined a five-step guide to building an emergency fund, credited to Christine Benz and provided to the AP, emphasizing tallying essential expenses and using the three to six months rule.
- To set a target, tally your essential monthly outlays including housing, utilities, food, debt, insurance and taxes, then use the three to six months guideline as a baseline; homeowners with mortgages or irregular-income workers should plan for a larger cushion.
- For safety, the guide recommends plain-vanilla cash investments like checking and savings accounts, money-market accounts and funds, and certificates of deposit , warning against bond funds and noting CDs carry early-withdrawal penalties.
- Hitting that target now offers immediate protection by making emergency funds a priority while homeowners secure a home equity line of credit as backup and keep cushions outside retirement accounts.
- Morningstar recommends rebranding emergency funds as 'cushion funds' and notes a Roth IRA can serve as a backup because contributions, but not earnings, are withdrawable without penalty, while bank money-market accounts are FDIC-insured unlike some mutual funds.
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16 Articles
Associated Press News+13 Reposted by 13 other sources
How to set and invest your emergency fund
Here’s how to figure out how big your emergency fund should be, and how you should invest it.
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How to Build an Emergency Fund That Works
Financial stability is not based on high rates of return. It begins with stability. When the economic environment is uncertain, unplanned expenses are not only possible but inevitable. Job loss, medical emergencies, unplanned travel, and vehicle breakdown are just a few examples of expenses that can disrupt financial stability. Emergency savings are perhaps the most basic, but most commonly overlooked, component of financial stability. It is not…
Coverage Details
Total News Sources16
Leaning Left10Leaning Right0Center4Last UpdatedBias Distribution71% Left
Bias Distribution
- 71% of the sources lean Left
71% Left
L 71%
C 29%
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