3 Things Not To Do With Emergency Fund - DM 90

Three things not to do with an emergency fund. Hey, it's Jon from Financial MD, and welcome to today's Didactic Minute.

Now we talk about emergency funds all the time. They are a huge part of your financial plan and number two in the plan, the safety net, and they're a piece of that. Now, there are three things that I picked out that you need to be aware of not to do with an emergency fund. Number one, don't invest it. I know it's tempting. You want to see that money sitting in there grow so you want to invest it in some stocks and try to get a little better growth than if it's just sitting in a savings account. I get it but don't do it. Why? Because when you need that money, it needs to be at that certain amount – at three to six months of your fixed expenses. And if it's invested – yes, stocks can go up, but what can they also do? They can also go down. So don't put your emergency fund in stocks, in Bitcoin, in mutual funds – any of that kind of stuff that has the possibility to go down. Right now, we've got high-yield savings accounts paying a really good interest rate compared to what they've been paying over the last 20 years. So just take advantage of that, be grateful for that, and put it somewhere where you know it's going to be.

Number two, don't put it in the same account that you log into every day to check your monthly daily spending because if you do, what happens? You're going to see that money there and you're going to think you've got more than you really do to spend and you're going to make some poor financial decisions. Protect yourself from yourself. Put that money into a separate account with a separate login; maybe even a separate bank if you have to. I've done that. There's no shame there.

Number three, the biggest mistake that we see is they don't do anything. Do something. Take this video and take action on something. Set up an account if that's all it is. Set up a sub-account. Put it somewhere. Move it somewhere. Take action on one of these things. Set up an automatic transfer. Start small; something that it's going to hurt a little bit but it'll do something. So just do something. That's the biggest mistake that we see.

Go to financialmd.com. We've got a lot more videos. There are some blog posts on this as well. We put some tips on doing some emergency funds. Check out our YouTube channel as well as our TikTok and Instagram. There are a lot of videos to help you get financially smarter. And then check out our podcast, the Financial MD Show. We go a little deeper. We have some fun. We goof around. It's me and a doctor. It's a good time.

Again, this is Jon from Financial MD, we'll see you next time. #FinancialMD #DidacticMinute #EmergencyFund

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