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How much cash should I keep as emergency savings?

Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Anyone remotely interested in personal finance should plan for an unforeseen event that could prevent you from earning money for a (hopefully) short period of time, because of job loss or any other unforeseen pothole in the old highway of life.

Your financial future could suddenly face a huge setback if you are ever forced to support yourself using high-interest credit cards. In a case like this, an emergency savings account could save your bacon. Finance experts will suggest that you keep in an easily accessed cash equivalent account three to six months of expenses. So make a list of what constitutes your monthly nut — rent, food, insurance premiums, car payment, Revolutionary War reenactor club dues, what have you — and multiply it by three and plan to have at the very least that magic number of dollars on hand. There are other factors that also may go into this equation — whether, for instance, you might have a spouse whose salary could carry you for a few months.

A word of caution: it’s not wise to keep too much of your savings available, since any money earning piddling interest in savings accounts or CDs, or collecting dust in your mattress, will not be out there enjoying the kind of gains available through investments in the equities market.

Last Updated December 19, 2017

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