We often hear about Emergency Funds in personal finance texts. A fund of easily accessible cash put aside for emergencies, if they should arise. Sometimes, especially when savings seem hard to come by, it might sound tempting to invest all our extra reserves to take advantage of economic growth. Certainly these past few years (currently 2019) have seemed an opportune time. But it wasn't always so.
Recently we had the opportunity to speak with some more seasoned life travelers. One story in specific stood out among the rest.
Francis (name changed to protect identity) grew up on the other side of the tracks. Don't leave the house after dark kind of tracks. But after going to college and starting his life, he got out from that circle of viciousness. He had a job, a tidy sum invested in the stock market. Things were on the up and up for Francis and his budding family. But then 2008 hit.
In 2008 the stock market crashed, as the US economy entered the worst recession in recent history. Jobs were lost, housing and stock prices plummeted, for some, it was the end of days. And bad luck has a way of following some people around.
Francis had recently had his second child, a sublime cause for celebration! Except there were complications at birth, and suddenly that exhilaration turned to concern. And a hefty doctors bill.
Not to worry! Francis had investments.
But in 2008 during the stock market crash, his investments were at an all time low. Liquidating at this time was ill-advised. But with mounting doctors bills, necessary. See Francis didn't have an emergency fund. He was enjoying the upward trajectory of the economy, right up until he wasn't enjoying it any more.
An emergency fund would have helped Francis weather the storm, and would have saved him from extraordinary losses as he paid off doctors bills.
Fast forward 10 years, and Francis has recovered economically, but his learning were paid for the hard way. And those lessons? Keep a little stashed away on the side for those sudden curve balls life throws. With a little emergency fund, you can be sure to weather economic storms and not see your fortunes washed away in a tidal wave.