Dear Dave,
I was thinking about putting my emergency fund savings into a balanced mutual fund. Would this be a good idea?
Trey
Dear Trey,
You should never put your emergency fund into anything that can go down in value, or anything that charges penalties for early withdrawals. I recommend putting it into a good money market account with check-writing privileges.
Remember, your emergency fund is insurance. It is not an investment. That three to six months of expenses you�ve saved has one purpose and one purpose only�to protect you, your family, and your stuff against the unexpected. You know how Murphy�s Law says anything that can go wrong will go wrong? Think of your emergency fund as Murphy repellent.
That�s one of the reasons an emergency fund is so important. If you don�t have one, and something unexpected happens, you�re likely to end up borrowing money from the bank, or cashing out retirement savings to fix things. So, don�t worry about investing this money. Just park it, and think of it as an insurance policy for when Murphy comes knocking at the door!
�Dave
