"Cash is King", a phrase often repeated when the economy or stock market experience downturns. While cash is usually not a great long-term investment, it may be the right place for a portion of your assets. By nature, emergencies are unpredictable. That’s why it’s so important for your emergency savings to be readily accessible when you need fast access to cash. Yet, many people “lock up” cash and short-term savings in time-deposit accounts such as certificates of deposit (CDs), many of which carry stiff penalties for early withdrawals. In fact, some impose up to six-months interest penalty charges.
With interest rates at historically low levels, investors are seeking higher returns on cash. It’s important to understand that any financial instrument can invite unwanted risk if your financial assets aren’t properly allocated based on your personal needs. Early withdrawal penalties associated with time-deposit accounts can be costly, potentially wiping out all or a portion of earnings. Likewise, when markets are volatile, selling longer-term investments like stocks or bonds at an inopportune time to raise cash to support short-term living or emergency expenses can quickly derail your financial strategy.
A comprehensive approach to investment management can help you avoid these situations and remain on track toward your goals. By thoroughly assessing your short- and long-term financial goals, spending needs, and tolerance for risk, we can work together to put an allocation strategy in place that is aligned with your goals and financial plan.
As always, we want to keep our focus on your goals, plan, and financial journey.
To learn more, contact us so that we can schedule a consultation or provide you with additional resources for managing financial risk.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Asset allocation is an investment strategy that will not guarantee a profit or protect you from loss.
Accessing Your Emergency Savings
February 19, 2021