If you do a google search on emergency funds, you will see a number of articles from a number of banks and other institutions that will tell you should have an emergency fund.

They will belabor that you should have your cash tucked away in some savings or checking account and that you should enough money to cover your expenses. Sometimes they will recommend 3 to 6 months. Other times the recommendation will be a whole year.

But should you really?

They tout this advise because they believe that just in case something happens you need to have quick and ready access to that money. For example, if you lose your job, there is a death in the family, your car breaks, and etc.

The reason that this is a bad idea is because

1. The worse thing to have is money that is not making money for you

Having money just sit there in a savings account earning .09% or if you’re lucky 2% is ludicrous. You could be earning way more. So rather than have your money just sitting there in fear of something that may not happen put it to better use.

2. Emergencies hardly ever happen

People recommend having an emergency fund because they worry that in the future something bad will happen and that you will need money. But lets say that something does happen, do you really need the money then and there? Usually you won’t need it for a good week or two. So, even if you have money in stocks for example, you can liquidate the stocks and pull your money out in a couple of days. But at least the whole time it was potentially earning any where from 10% to 15%. The same goes for other accounts that you may be using to invest. While it may take at most a week to access the money, it is still accessible.

3. Contingencies already exist

Today, if you really have an emergency and need to purchase something, what are you really going to do? Not a trick question. 9 times out of 10 you are going to use your credit card. Credit cards operate as everyone’s emergency fund. When the unexpected happens we put it on a credit card and handle it later.

So rather than think about and try to build the elusive emergency fund that many people clamor about, use that money to make money for you by investing it in whatever investment vehicle you are currently using.

Make sure that your account always has enough in it to cover your expense but any more than that and you’re shooting yourself in the foot or rather punching yourself in the face…