Reserve Fund

What is a 'Reserve Fund'

A reserve fund is an account set aside by an individual or business to meet any unexpected costs that may arise in the future as well as the future costs of upkeep. In most cases, the fund is simply a savings account or another highly liquid asset, as it is impossible to predict when an unexpected cost may arise. However, if the fund is set up to meet the costs of scheduled upgrades, less liquid assets may be used.

BREAKING DOWN 'Reserve Fund'

An individual, for example, may put money into a reserve account to save money in case of unexpected unemployment. A business, such as one dealing with rental properties, will put some rental income into a fund used to pay for any unexpected repairs to the properties. Condominiums often will set up reserve funds in which condo owners pay a set monthly amount to maintain the quality of the condominium.

RELATED TERMS
  1. Liquidity Cushion

    A reserve fund for a company or individual made up of highly ...
  2. Condominium Fee

    A maintenance fee charged by a condominium complex to cover the ...
  3. Fund

    A source of money that will be allocated to a specific purpose. ...
  4. Cost Of Funds

    The interest rate paid by financial institutions for the funds ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's ...
  6. Temporary New Account

    An account that is set up within a fund to hold a balance as ...
Related Articles
  1. Home & Auto

    Condo-Buying Walkthrough: Reasons To Buy A Condo

    Many features of condominium ownership are attractive to people exploring different options when it comes to the purchase of real estate. AmenitiesCondominium developments often provide access ...
  2. Economics

    What is the Cost of Funds?

    Cost of funds is the interest cost financial institutions pay to use the funds they deploy in their business.
  3. Investing

    Costs New Investors in Real Estate Do Not Consider

    As lucrative as real estate investment can be, there are a multitude of costs that new real estate investors must consider.
  4. Home & Auto

    An Introduction To Buying A Condominium

    This real estate investment provides unique advantages - and challenges.
  5. Home & Auto

    Condo-Buying Walkthrough: Condominium Fees

    Condominium fees are monthly dues paid by each unit owner. The fees are commonly based on the percentage of the development that is owned by each individual owner. For example, the owner of a ...
  6. Savings

    Banking: Savings Accounts 101

    By Amy FontinelleAfter checking accounts, the next biggest thing most people think about when they think about banking is savings accounts. Having a savings account somewhere to store extra cash ...
  7. Investing Basics

    Liquidation Blues: When Mutual Funds Close

    Underperforming funds often close their doors, leaving investors down and out.
  8. Home & Auto

    Condo-Buying Walkthrough: Condo Characteristics

    Condominium ownership is considered a hybrid form of ownership because it falls outside traditional structures of property ownership. Certain legal and technical characteristics help define condominium ...
  9. Home & Auto

    Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.
  10. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Mutual Funds

    What they are: A professionally managed pool of stocks, bonds and/or other instruments that is divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
RELATED FAQS
  1. Does it make sense for me to have a money market account if I don't want to buy any ...

    Saving funds within a money market account or mutual fund does not have to be limited to those wanting to buy or sell securities ... Read Answer >>
  2. How much money should I have in a savings account?

    Read a brief outline of the purpose of savings accounts, emergency funds and how to determine how much money to store for ... Read Answer >>
  3. If I want to have some cash in a liquid account for unexpected emergencies, what ...

    It's always a good idea to keep some money set aside in a liquid form, but it's a double-edged sword, because the more liquid ... Read Answer >>
  4. How much of my total assets should I be keeping in my money market account?

    Investing a portion of total assets in a cash position such as a money market account provides investors access to funds ... Read Answer >>
  5. What determines the interest rate in my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  6. What is the difference between a bank's liquidity and its liquid assets?

    Understand the relationship between a bank's liquid assets and its liquidity and how the financial crisis demonstrated the ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center