A 60-second read by Anthony Benante: You want to put your emergency funds in an account where the funds are easily accessible and not exposed to risk. Examples include traditional bank accounts that carry FDIC insurance (savings, checking, etc.). The current FDIC insurance limit is $250,000 (as of this posting), so you should structure your accounts appropriately to ensure your emergency funds are protected. You want your emergency funds secure and not exposed to any type of market volatility, since it is possible you may need access to the funds during times of financial stress in the markets. If you put emergency funds in a risk asset (an investment that can change in value, such as a stock), it could cause two financial problems, as opposed to having one financial solution.
How much you put in your emergency fund really depends on your specific situation, the stability of your job, your monthly budget and the consideration of all financial resources available. Typically, you want to put 6 to12 months of your salary away. If you are in a risky job or the majority of your income is from commissions or bonuses, the emergency fund may need to be more.
Please contact us at Baron if you would like help in determining an appropriate amount for an emergency fund that would be best for your specific circumstance.