Establishing a Proper Emergency Fund
Jan, a single 35-year-old marketing manager, earns $90,000 annually and has monthly living expenses of $5,000, which include rent, utilities, food, transportation, and minimum debt payments. She has $8,000 in a high-yield savings account and $12,000 in a taxable brokerage account. Sarah wants to ensure she has an adequate emergency fund.
Which of the following is the best recommendation for Sarah regarding her emergency fund?
- Maintain $30,000 in a highly liquid savings account.
- Use her brokerage account as her emergency fund since it has more funds available.
- Reduce her emergency fund to $5,000 since she has other assets available.
- Invest her emergency fund in a diversified stock portfolio to maximize returns.
