Bond Funds Allow You to Earn Interest on Your Emergency Fund While Maintaining Liquidity
An emergency fund is needed to clean up your finances. However, some argue that it is a shame to leave that amount of money in a low-yield savings account. At the same time, investing in it is risky because you need your funds to be liquid. One financial planner offers a solution: short-term bond funds.
Ellen Jordan, a certified financial planner and senior vice president of the Bryn Mawr Trust, told Business Insider that this is a conservative, low-risk investment. Thus, you will not receive the same income as, say, investing in the stock market. However, the stock market can be volatile and in the event of an emergency, you probably won’t have time to wait for the market to recover. In short, you don’t want to risk your emergency fund. Short-term bond funds, Jordan says, will bring you higher returns than a traditional savings account, and better yet, your money is liquid so you can withdraw your cash in case of an emergency.
She emphasizes that quick access is very important: “You don’t want to tie this money. It’s literally something that should be available as quickly as possible, so it doesn’t make sense to put it on something like a six-month CD. “
With short-term bond funds, you will also receive more interest on the money than if it was in a checking, savings, or cash account, Jordan said.
Of course, this is just one suggestion . If you want to optimize your emergency fund, weigh your options and then choose the one that works best for your situation. For more details please follow the link below.
This is where you should keep your emergency fund | Business Insider