Opinion: An Emergency Fund Is Important

Daniella Cressman

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Karolina Grabowska

Disclaimer: I am not an expert in personal finance. Please consult someone who works in the finance industry before making any financial decisions.

Within the personal finance community, there are two groups of people: One firmly believes that there is no reason to build your emergency fund for hard times because your money will not grow that way; the other thinks it's nice to have some cash to hold you over just in case you receiving income fluctuates.

If you are recieving income from stocks, for example, the markets go up and down and, although the average return adds up to about 10% annually, you could lose money. Real estate is relatively predictable, but you do have to have tenants to earn an income.

In short, I think it's extremely important to have at least $24,000 in your account, even if it takes you a few years to save that much money, so that you can support yourself if times get tough: You never know what might happen.

For instance, if you are a freelancer, you could have a month where you don't earn as much as you had anticipated, so it's important to be able to cover your basic needs—food and shelter—despite these circumstances.

If you work for someone else, you still run the risk of being terminated or laid off, for reasons that may or may not be warranted, so it's important to have something to fall back on.

Additionally, all investments fluctuate at some level, so you'll want to have an insurance policy of sorts.

That's what an emergency fund is.

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
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