Josh:  Hi, I'm  Josh Tirado. And on this episode of Making Smart Decisions Podcast, we are going to touch on the emergency fund. What is it in? Do you need one? Most financial advice starts with the basis of you should have an emergency fund. And a lot of people just view that as a savings type account and yes, you should absolutely have that it might seem pretty simple, but let's dive down into that a little bit deeper when it comes to the emergency fund, the old rule of thumb was you should have put aside three months worth of living expenses.

[00:02:12] Not three months worth of your salary, the three months worth of your bills, and your living expenses to get you through something tough

[00:02:19] Over time, what I tell my clients is that has evolved and I recommend a good starting point is three months' worth of living expenses. Ideally, you want to get up to about six months worth of living expenses. The reason being if you suffer a sickness or an injury or some other sort of serious issue, and you cannot work, studies show that most people are back to work within six months. If you could have six months' worth of living expenses, put aside most illnesses and injuries that you'll be able to recover from them within six months and get back to them.

[00:02:51]So I think the emergency fund is important. I think you should shoot for three months' worth of living expenses, build up to six months worth of living expenses. And then depending on your situation, take it from there. More is not bad in that sort of situation. But also bear in mind. It doesn't just have to be sitting there in a savings account.

[00:03:08] It could be invested in something very conservative, earning you more money than a savings account, and still be relatively liquid where we can get a transferred back into your bank account or into your hands within. 24 48, 36 hours. So if there really is an emergency, you can still have your hands on the money within a day or two.

[00:03:29] It doesn't have to be where you need that money that day. So for many of my more conservative clients, when their emergency fund continues to grow, we will keep a portion of it in savings or checking as cash. And the rest of it, we do start to siphon it off into an investment account where they can earn something on it, and it is still.

[00:03:48]Very accessible and relatively liquid.  do think the emergency fund is a basis for very many people. I think you just start with that. And I think the three to six months of living expenses is also a good rule of thumb.