I've saved a 6 month emergency fund since my husband went back to work. Now that things are more stable, I'm thinking of investing some of this.
Zoe, The answer to your question really depends on your individual situation. You may want to keep the money in cash as an emergency fund just in case. If you want to invest it, then be sure that you understand the potential risk and return associated with your investments. If you want to designate this investment portfolio as a sort of "emergency fund" then you may want to consider liquid, low volatile investments such as cash and fixed income. CDs may also be worth considering. I would need to know more about your overall situation in order to answer more specifically. I hope this is helpful. Best of luck.
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It's not "emergency savings" if you invest it in risky instruments. The problem with emergencies is that we never see them coming. I recommend continuing to invest your emergency savings balance in very low risk instruments. I know it may feel like the money is not working hard enough for you, but that's not the goal here. The goal is to maintain a cushion of risk-free ready capital...just in case.
Here's a good idea for you. Focus your attention now on building excess cash to fund your investment/retirement account. You seem to be doing pretty well financially right now, so as you manage your monthly bills, create another "bill" for your retirement savings. This is an automatic transfer of a certain amount of cash each month into a segregated investment account. Of course, you should fully fund any pre-tax alternatives such as a company 401k first, and maybe a tax-deferred solution like a contributory IRA second, but get in the habit of "paying" your retirement savings account just like any other monthly bill.
I suggest holding 6 months of emergency savings safe, liquid, and accessible, like a bank or money market.
I recommend investing all future savings.
It depends. When constructing your investment policy statement there should be at least a 3 to 6 month cash reserve to cover living expenses and other dollars should normally get invested. Some clients prefer a larger reserve which is fine. It also depends on whether you are in accumulation or distribution mode.
Zoe, most planners would agree that having between 3-6 months of emergency savings is a good idea. If your husband's new job is pretty solid and the income is stable, then you might consider a high quality short or ultrashort term bond fund to try to get a little more return than the bank is paying, but you still should maintain this buffer, so you don't want to take a lot of risk with it. Pimco, FPA, Vanguard, and T.Rowe Price all offer such funds that you might consider. Other good resources for research would be Morningstar and Lipper. If you have a financial advisor, then he or she should be able to help you find and evaluate suitable options.
First let me say what an awesome problem you have. Depending on the environment of work your family does depends on how much emergency fund should stay in that fund most experts say 3+ months is a good start. So depleting that fund down may with what in it may not be the move recommended. So start with the budget you allotted monthly to fund the emergency fund by monthly funding your 401k's up to the match Next look at your ROTH Contributions and if your beyond that point comment on the answer and I will give you some more steps
You may be in a great position to consider investing some of those emergency funds. I agree with David that once your husband is able to contribute to a company retirement plan, he should do so. In the meantime you could consider some investments that might offer a better return but still give you liquidity in case of a true financial emergency. Or, if you have other debt like credit card debt it would be very wise to consider paying that high interest debt down with some of these funds.
Keeping your emergency savings in place, in a low-risk account such as savings or money market, is fundamental financial planning. If it's grown larger than you need, and you want to invest for other short or long term goals, then yes, it is a wonderful time to invest appropriately for those goals. You've received some excellent advice above, so best wishes.
First let me say congratulations! Having an emergency account is one of the most important building blocks for a solid financial plan. My advice for you and I do not sell any products is not to go backwards. Investments should be time frames of 3+ years and emergencies do not fit in that time frame. It is impossible to tell when or where an emergency will happen. We often think of emergency accounts for loss of job, but they can be much more. Health care is a big area that often affects people’s finances beyond their budget. The only exception I would consider is if you had debt and even there I would try to stop funding the emergency account and shift money towards paying them off. This reduction would also reduce the income you would need to meet expenses. Again great job and keep up the good work.