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Where can I invest my money if I want to be able to easily access it in case of an emergency?

I am starting out in investing and I have $8,000 to invest and can also invest an additional $500 every month. Currently, I have a checking account, but no savings account. I am a risk taker and want to earn good interest on the money deposited, but just in case of an emergency, I might need to take back the money. Do I need to open a savings account, CD, or money market account? I want to earn at least 2 to 3 percent in interest. Alternatively, should I invest this money in a mutual fund?

Banking, Investing, Mutual Funds
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November 2018

When you think about where to put your emergency fund, you should think about keeping it in a place that’s safe from market risk, easy to access, and can earn some interest. A savings account or a money market account fits all three criteria. Your emergency savings is for any unexpected expenses; for example, a job loss, car repairs, medical expenses, etc. You should look at bankrate.com to compare rates for savings and money market interest rates. The rule of thumb for emergency savings is to have 3 – 6 months of living expenses in a good economy, and 9 – 18 months during a recession.

Once you established your emergency fund, you can put money towards investing for long-term growth. This is money you don’t plan to take out in the next 3-5 years at a minimum. A good place to start is to look at diversified ETFs with low expense ratios. ETFs can be a good choice relative to mutual funds as they typically offer greater tax efficiency. Since you’re planning to invest monthly, you’re also dollar-cost averaging. When the market is up, you’ll purchase fewer shares, and when the market is down, you’ll purchase more shares. The theory is that over time, you pay the “average” amount for your shares. 

November 2018
November 2018
November 2018
November 2018