There’s more to wealth than maintaining a stable income. Financial health also includes managing your cash in strategic ways. Modearn™ Advisors Kevin Rex and Thao Truong discuss smart ways to help you balance investments and liquidity, the best accounts where you can store your cash, and how much you should save in your emergency fund for those unexpected situations.
*Here are some key takeaways from their conversation:*
• If you’re in your wealth building years, it’s important to have your investments grow through compound interest while ensuring you have access to liquidity for emergencies.
• Kevin shares his perspective on having “access” to cash by using a Home Equity Line of Credit (HELOC) while still maximizing the growth potential of his investments.
• A general rule of thumb for emergency funds is they should cover 3 to 6 months of expenses. Thao says it is important to understand your individual needs, circumstances (like job stability) and monthly expenses when determining the size of your emergency fund.
• For short-term needs, Thao and Kevin suggest high-yield savings accounts, which offer immediate access to cash while earning interest.
• For funds that won’t be needed for some time, CDs can be a good option as they offer higher interest rates but come with a lockup period. Investment accounts (stocks, bonds, mutual funds) are also a good option for funds that won’t be needed for several years; however, they come with volatility risk.
• Treasuries can be more flexible than CDs as they can be sold before maturity before penalties and offer competitive interest rates without state income tax. However, their value can fluctuate with market conditions.
*Keep watching towards the end to catch our “This or That” segment where Thao and Kevin ask these rapid fire questions to each other:*
• You get $5,000 from a tax refund. Do you put it toward emergency fund, invest it, or pay off debt?
• CD or Treasury Bonds?
• Your group of friends are planning a vacation and you don't have the money. Tap into your emergency fund?
