Emergency Funds and Cash Reserves
One of the few personal finance concepts that garners near-universal praise is the emergency fund.
For many topics in personal finance, there are seemingly as many critics as there are advocates. “The stock market is too risky”. “You can’t retire early because you need health insurance”. “You shouldn’t travel because it’s wastefully expensive”.
I don’t agree with any of these perspectives. But you very often hear people offer them as feedback.
Thankfully, few people dismiss the concept of emergency funds since they should be an essential component of everyone’s personal finances.
What is an Emergency Fund?
An emergency fund, also called a “rainy day fund” or “cash reserves,” is money you have access to in case of an unplanned sudden need.
Typically, these funds are in the form of cash or cash equivalents. We’ll jump into account and investment options later.