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Cash Reserves
Learning Center • financial tips • cash reserves • insurance • savings accounts • growth investments • taxes • retirement • estate planning  |
Your cash reserves is the extra money you keep to pay for the unexpected things that happen and small emergencies. For example, your spouse falls down the stairs, breaks her wrist and gets a big gash in her leg. Your expenses after the insurance are $300 plus. Your cash reserve is created to pay those unexpected expenses.
For many people, this cash reserve may be just the money in their pocket or purse. However, ideally it will be a small separate account. If you just have a little extra money in your checking account or available credit on a credit card, it is too easy to spend that and you’ll probably spend it.
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In a good financial plan, you control your cash flow by having a separate account for your cash reserve that you do not use for normal day-to-day expenses,. You also don't want to have to take money out of your savings or investment and retirement accounts because of the early withdrawal penalties and possible taxes that could become due.
Peterson Money Books
Book: MONEY Changes Everything, by Erlend Peterson, CFP
Seven Simple Steps That Will Make Money Work For You!
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