Reasons on Why you must not Invest Your Emergency Fund
The best way is to put your emergency fund in a savings account that has a good interest rate like 3.2% and helps you to earn more. Some banks have savings account with 1% interest rates which is one main reason, many consumers think of investing their money instead. But think while you are in urgent need of your emergency money and the market takes a downturn. You will end up surviving with only a very less emergency fund in such a crisis. Even worse will it be when you are unemployed and have no other option but to depend on your emergency fund that has not got any returns? Surviving on a small emergency fund is not of any use. Even if you invest in an emergency fund, make sure you do not withdraw it when is the market is very low. Added, you will have to pay an extra fee or penalty for withdrawing it before the maturity period when you are in an emergency crisis. This fee is at least three months of interest. If you withdraw too early, you also lose money on the principal. In a nutshell, there is not much growth if you invest your emergency fund in any investment which you might withdraw before it matures.
Lloyd Blankfein, me, the owner of cnntopnews, have a business management degree. Have 3 years of articles write.