Investors or savers interested in to become investors – have additional considerations.
With shares reach records, some people might find it frustrating to put all of their disposable income into a savings account – even if it’s a high-yield savings account – which earns next to nothing in today’s interest rate environment. low interest.
But remember, “The goal of your emergency fund isn’t to grow,” says Thomas Kopelman, financial planner and co-founder of Indianapolis-based AllStreet Wealth. Rather, the objective of the fund is to be there when you need it most. Once you’re in good standing with your emergency savings and stable with the rest of your finances, Kopelman says, “you earn the right to invest.”
You can still take advantage of opportunities in the market, but think carefully about your risk tolerance beforehand.
Bera uses the example of maximizing an annual Roth IRA contribution — a decision that, in some cases, can take precedence over building a bulky emergency fund, she says. Roth IRAs have contribution limits; your savings for rainy days do not. So if you know you’ll have enough cash to keep adding to your emergency fund a year from now, the trade-off may be worth it.