No one wants to have a reason to access cash in an emergency. However for most of us just such a situation will come to pass at one point or another. It could be a relatively minor emergency such as a broken refrigerator that needs mending. On the other hand it could be something major that requires a larger injection of cash. If you were to lose your job you may not find another one immediately for example. In this case you’d definitely need access to any cash you had saved up.
While we hope you never experience anything this major, it is wise to figure out how you would cope if this situation ever cropped up. The main task is to make sure you have three months’ worth of earnings saved up that are easy to get to at a moment’s notice. We’ve spoken about this before. This should be your first priority as it gives you an instant three month cushion to fall back on.
However, what should you do beyond this? We’ve all heard stories of people who are rich and yet they are struggling to get by from day to day. Normally they say something like this: “All my money is tied up.” There is no use being financially sound if you cannot actually access any of your money when you need it most.
So when it comes to your investments, it is wise to consider which ones you could cash in quickly if you needed to. Of course, you don’t want all your money in instant access accounts because they pay relatively poor. However you should make sure you have that three month cushion and then look for better investments beyond that.
Ideally you should have a varied portfolio that permits you access to investments at different times. For example you might have a long term savings plan that means you cannot touch a certain sum of money for five years. That’s fine, but don’t drop all your savings into it. Make sure you can keep some back so you can access them whenever you need to.
If you have stocks and shares, look into how easily you can cash them in. This might depend on whether you have invested in them directly or whether they are part of a managed fund. Always make sure you find out these answers before you need to know them, i.e. before you find you need to get at the cash. You should know the terms and conditions for accessing your money (with or without penalty) before you buy into the investment in the first place.
There is arguably nothing worse than needing money, knowing you have it and not being able to get at it. By focusing on this issue as soon as possible you will have confidence that you can get at your money should you ever need to. Having the peace of mind is worth a lot more than you might think.