Question

Which of the following is classified as an emergency fund?


$20,000 in a mutual fund with a 7% annual return

$10,000 on loan from your bank

$5,000 in a 0% interest checking account at your bank

$8,000 in a 1.5% interest account your bank

Answer 1

An emergency fund should be liquid, low-risk, and readily accessible. So the $5,000 in a 0% checking account and the $8,000 in a 1.5% bank account qualify.

The $20,000 in a mutual fund is invested and carries market risk (not ideal), and the $10,000 bank loan is debt, not savings.