When you have saved up your emergency funds, is it recommended to invest part of it?

Your emergency fund is supposed to help you tide over a financial difficulty when a crisis occur.

Now, imagine that a crisis occur, e.g. job loss. If your investment is doing well, you sell and get a profit. But what if your investment is not doing well? Are you willing to sell it at a loss? To add on, will the redeemed amount be enough to tide you through the crisis?

Generally, it is suggested to put your emergency funds in a financial instrument that you can assess to readily, without huge capital loss. Otherwise, it won't really be an emergency fund.

Read More:

Understanding Your Personal Cash Flow

I share quality content on estate planning and financial planning here.

Hi anon,

I would not recommend doing so. Just keep them in a high yield savings account first, or consider short term FDs, SSBs or money market funds, depending on the returns. They are never to be touched unless you have an emergency. Yes, there's an opportunity cost to not investing them, but this is just how it works.

In time, even our emergency funds need to grow in tandem with inflation and rising expenses. So in a way, you should try to ensure that your fund grows a little every year.