Citi Personal Wealth Management
Have you given some thought to setting aside money for a financial emergency? Whether it's in case you lose your job, need to replace the furnace or have an unexpected car repair, your goal is to make sure you're covered without going overboard.
Conventional wisdom says it's prudent to have six months of living expenses set aside in a savings account or a money–market. Give some thought to whether you need that much emergency money. Yes, if your job is tenuous and you are the family's sole breadwinner, keeping the full six months may make sense. However, if both you and your spouse work, you may need less, because you could cut back spending and live on a single paycheck if one of you loses your job. A caveat: The smaller emergency fund may not be prudent if there's a risk you could both lose your job at the same time because, say, you work for the same company or in the same industry.
If you've managed to save a moderate amount of money in your accounts, keeping a separate emergency reserve may not be necessary. In addition to tapping taxable accounts for a source of funds in the event of an emergency, other options that you may wish to consider after reviewing the risks, including the risk of loss of compounding, with your tax advisor and others include:
As you ponder how you might cope with a financial emergency, don't just consider where you'll turn for cash. Also look to keep your cost of living under control, including.
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