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Cash Reserves
Learning Center • financial tips • cash reserves • insurance • savings accounts • growth investments • taxes • retirement • estate planning  |
You have your long-term investments in stocks, bonds, mutual funds, real estate and businesses. You also need a cash reserve which is a special short-term account, probably a separate money market account or tax-free bond fund, which is available just for the unexpected expenses and purchasing opportunities that come up.
In general, your cash reserve should probably have the equivalent of three to six months’ expenses in it when you are working, and about one year’s expenses when you are retired.
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For most people, their cash reserve is an inactive account that just sits quietly in their bank or bond fund. They are not buying and selling in that account, and not trying to make a big profit in that account. It is like a fire extinguisher, it is for emergency use only. But it is important so they keep it up and keep it available.
Peterson Money Books
Book: The Challenge of WEALTH, by Erlend Peterson, CFP
Managing the Joys, Responsibilities, and Opportunities
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