April is Financial Literacy Month – Step 3 of Building a Solid Financial Foundation by Chantay Moore
If you ever speak with a financial professional, you will always hear us say, you need to have an emergency fund. Preferably 3-6 months of your income set aside to pay for all of your basic living expenses, especially, during times like now, where folks are losing significant streams of income. Most people either save money in cash at home or turn to bank savings accounts. For the latter, I would actually avoid putting lots of money in a bank savings account for emergency purposes for two reasons. First, since most banks give us easy access to our accounts electronically, it’s too easy to transfer money from your savings account to your checking account and now that money is spent. Secondly, banks typically offer very low-interest rates on their accounts. So, if you have money sitting in the bank for a period of time, you will likely not see any type of growth and would actually be losing money due to inflation, which is the cost of living going up.
If you plan to have money set aside anywhere, the goal should be for those funds to grow as well, especially, if they may be untouched for a period of time. For this, I often look to low-cost investment accounts for an emergency fund. Working with a properly licensed financial professional, there’s a good chance you could earn upwards of 4-6% interest vs the less than 1% most banks earn. Of course, nothing is guaranteed but why not give your money a better chance to grow than to do nothing for you. Plus, these type of investment accounts are still accessible because you could sell your investments and have cash in your bank account within a few days if you needed it for emergencies.
Want to see if this strategy makes sense for you, talk to one of our licensed financial professionals: https://www.nafls.com/financial-advising-services/
Please feel free to reach out to Chantay Moore directly at: Facebook.com/nativeafls