Keeping Money On Hand for Emergencies


There are a variety of business and personal situations that might crop up where you’d appreciate having extra money on hand, such as when your central air conditioning calls it quits, or when your clients are delayed in paying their invoices, leaving you unable to pay your monthly bills on time.Life can change in an instant, so even if you’re running a successful business, you still need an available emergency fund. There are a variety of business and personal situations that might crop up where you’d appreciate having extra money on hand, such as when your central air conditioning calls it quits, or when your clients are delayed in paying their invoices, leaving you unable to pay your monthly bills on time.
It’s important to prepare for emergency situations so that you’re not suddenly scrambling to pay for unforeseen expenses with a high-interest credit card, which will only add debt to your financial situation. “Cash is always important to have, whether it’s for an emergency or an opportunity. With cash, you can always act prudently without stress,” Michael Dubis, a Certified Financial Planner with Michael A. Dubis Financial Planning in Madison, Wisconsin, told Entrepreneur.com.

It’s preferable if you have between three and six months’ worth of living expenses stashed in liquid accounts. If you run a small business, your income is likely to be unpredictable. For that reason, Dubis recommends that entrepreneurs set aside a full year’s worth of expenses, except in the case where one spouse has a salaried job, and then six months of liquid emergency savings should be sufficient.

Your emergency fund needs to be easily accessible, so don’t plan on socking away money into stocks or a long-term certificate of deposit. For both personal and professional use, Entrepreneur.com offers the following options to help establish your emergency fund.

S. Treasury bills

Also known as T-bills, U.S. Treasury bills are backed by the U.S. government and are considered a safe and liquid investment. You can purchase T-bills with varying maturity dates, ranging from several days to one year. Vary maturity dates with different interest rates so that you’ll always have money at your fingertips without early-withdrawal penalty fees.

Certificates of Deposit

Commonly known as CDs, these FDIC-insured investments are a fine way to add stability to your emergency fund and gain a little interest in the process. They are offered in various maturity increments from three months up to a five-year jumbo CD. To help build up your emergency fund, choose shorter maturity dates, and stagger them so that you have cash available every few months. Remember, there’s a penalty for early withdrawal.

Money Market Accounts

Another way to keep your money liquid is with a money market account. Interest is generally low, but you can get access to your money via an ATM card, online transfers or checks.

A Traditional Savings Account

A traditional bank savings account is a great place to stash money for an emergency fund. It’s quick and easy, and you don’t have to worry about early-withdrawal fees or rotating maturity dates, as in CDs. Plus, it’s simple to withdraw cash or transfer money to any other account.

A small business must always think ahead. Part of this vision should include a healthy emergency fund so that you’re always financially prepared for unexpected situations. If you haven’t done so already, start building your emergency savings at a comfortable pace for you and your business. Remember, you’re not alone. Your trusted financial institution can help you pick the best products to meet your needs, one step at a time.

 

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