Opportunity Cost of an Emergency Fund
Be Wealthy & Smart
Linda P. Jones
4.8 ⢠883 Ratings
šļø 21 February 2020
ā±ļø 15 minutes
šļø Recording | iTunes | RSS
š§¾ļø Download transcript
Summary
Learn what the opportunity cost is for a $1k, $5k and $100k emergency fund.
Let's walk through the math of the opportunity cost of a money market account, savings account, and long-term stock market returns.
We use ETFs (indexes), not individual stocks. Once you understand wealth building is all about compounding, you won't look at your emergency fund the same way.
Are you investing well for financial freedom...or not?
If you invest $10,000 per year for retirement, but earn only 2%, after 20 years you'll have $262,692 and after 30 years $431,908.
However, if you invested for growth and the stock market averaged 10% annually, your $10,000 per year would grow to $697,299 after 20 years and $1,983,928 after 30 years! A huge difference.
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Transcript
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| 0:00.0 | Be wealthy and smart, episode 684. |
| 0:03.0 | I'm gonna live no rich life. |
| 0:06.0 | Rich life. |
| 0:08.0 | If y'all know what I mean, put your hands up and declare with me |
| 0:13.8 | Yeah, I'm full of bed time I'm gonna live the good life |
| 0:20.8 | I'm gonna live the good life |
| 0:21.3 | a beautiful and glorious light Step into a world of wealth and wealth and financial freedom without budgets, boredom or bosses on |
| 0:31.4 | be wealthy and smart. And now here's your host, Linda P. Jones. |
| 0:37.0 | Welcome to Be Wealthy and Smart. I'm Linda P. Jones, America's Wealth Mentor, Empowering |
| 0:42.4 | Women and Men Worldwide to Financial Freedom. |
| 0:45.0 | On today's show, we're going to talk about the opportunity cost of an emergency fund, because |
| 0:50.2 | while it's good to have some funds for an emergency, sometimes those funds can be very |
| 0:55.4 | excessive and there is an opportunity cost if you have too much in your emergency fund. |
| 1:01.8 | So I wanted to go through the numbers with you, go through the thought |
| 1:05.0 | process behind this, and see what you think about this emergency fund analysis. So this came |
| 1:12.2 | to us as a listener question. So let me first share that with you. |
| 1:17.0 | So he says, I'm at a bit of a crossroads. I have about $100,000 in my savings and I know this sounds silly but I don't know what to do with it. |
| 1:25.2 | I've gotten very used to having a good amount in my savings but ever since listening to |
| 1:30.0 | the podcast I know I should be doing something else with it like I am with my other investments. |
| 1:36.0 | Of course, since this is my only savings, I want to have a good reserve in case of an emergency |
| 1:41.0 | as with anything. |
| 1:42.0 | I'm not married or have kids yet. I have money |
... |
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