FIN 420 - Week 3 - DQ 2

FIN 420 - Week 3 - DQ 2 - encourage people to take all of...

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Financial experts agree that having an emergency fund is an essential component of a comprehensive financial plan. However, advice regarding the number of months of household expenses the emergency fund should cover varies between 3 and 9 months. Taking into account the current financial environment, how many months of expenses would you recommend for an emergency fund and why? What are three investment options that are appropriate for an emergency fund? Which of these investment options offer the best returns? What reasons might encourage you to forego a higher return on your emergency funds? With the situation we are facing in the current financial environment, I would actually recommend at least a years worth of emergency savings. The reason for this is the continuous uncertainty that our society is facing. I have seen too many people who do lose their jobs can be out of consistent for more than 9 months. I tend to always
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Unformatted text preview: encourage people to take all of the necessary precautions, sometimes more than what may be deemed as sufficient. Having more funds also helps in the event that if you are out of work for a short period of time and then get a job rather quickly, you have an excess in your emergency funds that will allow you to stay within a 3 to 9 month emergency fund range. As for the types of investments to go with, the best choices are typically your savings account, CD's, and Mutual Funds. The reason being is that these investments are assured to bring back a return. If you have the funds to put into a CD that usually brings the best return, however you typically can't pull funds out of a CD without incurring penalties. Because of that it may not be the best choice even though it has the best return. . I think the mutual funds would probably be the best of these to invest in....
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