ACCUMULATING AN EMERGENCY FUND

The highest investment priority for any individual or family unit is to establish an adequate emergency fund. Every individual need to have access to a fund that can support emergency spending needs for such things as unexpected medical expenses, ordinary living expenditures during a short-term period of unemployment, or the replacement of assets that are unexpectedly lost. Even though each of these loses may be at least partially offset with appropriate insurance coverage, individuals will nearly always encounter unexpected monetary needs. Because an emergency fund is designed to provide for unexpected difficulties, safety of principal, stability of value, and excellent liquidity are the prime considerations for assets that are selected for such a fund. These strict restrictions eliminate the majority of investment vehicles from consideration. For example, common stocks, intermediate- and long-term bonds, preferred stocks, real estate, and gold bullion are not considered suitable investments for emergency funds. These investment vehicles are all short of safety, stability, and liquidity.