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16 | October 11, 2018 | The winnetka Current sound off
winnetkacurrent.com
Mindful Money
Police-Fire Open House shows importance of emergency funds
Kathy Roeser
Contributing Columnist
Winnetka resident
This coming Saturday,
the Winnetka
Police and Fire
Departments are hosting a
community open house to
coincide with Fire Prevention
Week. Attendees will
have the opportunity to
tour the facilities, view
equipment demos and sit
inside emergency response
vehicles.
This type of event
truly demonstrates the
importance of proactively
planning for emergencies.
While there may not be a
sure-handed mechanism
for preventing emergencies,
preparing beforehand
can help to mitigate the
outcome. One area that
is often overlooked is
finances. Emergencies
and disasters can levy
a significant financial
burden on those who are
unprepared. As a wealth
advisor, clients often ask
for advice on preventing
this type of situation. My
answer? Have an emergency
fund. Here’s why:
Emergency Fund 101
An emergency fund
is essentially a savings
account specifically
reserved for use after an
unexpected event. This
might be a fire that causes
thousands of dollars in
damage to a home, or
injuries sustained from a
car accident that require
emergency surgery. In the
aftermath of these type
of events, absorbing the
subsequent expenses into
daily operating budgets
is not always plausible.
Insurance plays an important
role, but the recovery
process after any unexpected
emergency is
generally quite expensive.
A robust emergency
fund helps to alleviate
some of that financial
strain by providing a
critically important cash
buffer. Even having a few
thousand dollars set aside
can make a huge difference,
not to mention the
time and resources saved
by not having to worry
about affording certain
expenses. Most experts
recommend stocking an
emergency fund with
enough cash to sustain at
least three-to-six monthsworth
of living, but you
should never really cease
contributions.
Remember, having a
well-funded account only
serves to offer a greater
peace of mind for both the
account holder and their
loved ones.
Protection on multiple
fronts
The sheer presence
of an emergency fund
(regardless of the total
amount) protects your
portfolio and long-term
financial goals in a
variety of different ways.
First and foremost, having
emergency money set
aside reduces the likelihood
that you will have
to either borrow from
relatives/friends (which
may create an uncomfortable
situation) or draw
from investment assets,
401(k)’s, IRA’s or other
core financial accounts to
cover expenses in the aftermath.
That cash buffer
may also decrease reliance
on credit during an
emergency, which assists
in keeping your credit
score intact. Finally, an
emergency fund protects
your personal and professional
goals by helping
to expedite recovery and/
or rebuilding. Not that
money is the only factor,
but being financially
prepared can simplify the
process.
Winnetka Fire Prevention
Week and the upcoming
Police-Fire Open
House provide the perfect
chance to review your
family emergency planning
protocols. This year,
ensure that establishing,
building and/or refining
that emergency fund is
high on the “to-do” list.
Kathy Roeser is a managing
director and wealth adviser
with the Wealth Management
Division of Morgan Stanley
in Chicago. The information
contained in this column is
not a solicitation to purchase
or sell investments. Sources
available upon request.
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