My Money Isn’t Earning Anything!

Imagine working your tail off to earn a bunch of money that is just sitting there in a bank account earning nothing. It sounds like a bad investment, but it is some of the best financial advice I can give, and it is called an emergency fund.When you’re learning about investing, you are taught to keep your money active so that it isn’t sitting idle. That is why saving 6-12 months of your monthly expenses in a low-interest-bearing savings account sounds like a terrible idea. But there is wisdom in an emergency fund, and everyone should have one.Before diving into the specific benefits of an emergency fund, I would like to point out that an emergency fund is insurance against all of the unforeseen expenses that you will incur throughout your life. Similar to how automobile insurance offsets the risk of an accident, an emergency fund offsets the risk of you not having cash to cover an emergency.Here are some of the more common emergencies that a properly funded emergency fund could cover:Job lossMajor health expenseMajor dental expenseEmergency pet careCar repairsHome repairsBigger-than-expected tax billUnanticipated travelFuneral costsUnexpected loan payment increaseFrozen account (or reduced credit line) The general rule of thumb for an emergency fund is to save the equivalent of 3-6 months of your monthly expenses; however, due to the COVID wake-up call, it would probably be better to save 6-12 months.As you set aside money in a savings account that is earning nothing, you might be frustrated by the idea that it could be making so much more if you invested it in the stock market. Don’t fall for this trap—an emergency fund is insurance and not an investment. If you want to earn a little more, go to bankrate.com to find high-yielding savings accounts and set your money there.No matter how you go about doing it, work towards a fully-funded emergency fund today!