You have plenty of investments sitting in your financial portfolio. If things are going according to plan, all of these investments are growing, building up your wealth and providing significant safety nets that you can rely on.
You might need to rely on them sooner rather than later. An urgent expense could drop into your lap, and you might not have enough in your checking account to quickly cover it. So, you might have to turn to one of your investments to get out of the mess.
Which investments can you turn to? It all depends on their accessibility in an emergency. Read ahead to find out if your investment is easily accessible or not.
Savings Account
As far as investments go, savings accounts are extremely accessible. Your savings are liquid, so you don’t have to go through a process of trading or selling to acquire the cash value. You can transfer or withdraw funds instantaneously. Your account may have a limited number of transfers/withdrawals in a month (typically 6 per month), but you are allowed to surpass that. Your bank will simply charge you a fee for crossing that limit. Your money is still accessible.
A Money Market Account (MMA) is a type of savings account that comes with even more accessibility features. Users will have a debit card and a checkbook. So, they can use their savings to cover a purchase via debit card, cash withdrawal, written check or money transfer through an app. This makes MMAs very convenient places to store emergency funds.
Certificate of Deposit
Technically, the earnings in your Certificate of Deposit (CD) are inaccessible until the account reaches its maturity date. Depending on the timeline you picked, that maturity date could be in six months, a year, two years or longer. It is possible to make a withdrawal from your CD account before reaching that maturity date, but it comes with a consequence: you will face an early withdrawal penalty.
You can avoid this situation entirely by taking out a no-penalty CD. A no-penalty CD allows you to make early withdrawals from your investment without charging a fee. To compensate for this benefit, no-penalty CDs tend to offer lower interest rates than CDs with early withdrawal penalties. You should also know that even no-penalty CDs restrict users from making withdrawals in the first week of opening the account.
Retirement Savings
Your retirement savings are stored in a specialized investment account like a 401(k) or an individual retirement account (IRA). If you’ve managed to maximize your retirement savings, you might have both types of accounts under your belt.
Your retirement savings might be your most substantial savings collection, so it will be tempting to dip into them when you have an urgent expense. However, your retirement savings aren’t that accessible. Making a withdrawal from your account can take time, especially when it involves selling attached mutual funds, stocks or bonds. You will face an early withdrawal penalty tax of 10% from the IRS if you are making this withdrawal before the age of 59 ½.
Cryptocurrency
Cryptocurrency is another investment that you might be tempted to turn to in an emergency, but it’s not your best option. First, the volatility of crypto markets could make cashing out on your investment a bad idea. Second, even if your investment is going well, you will have to trade or sell it in order to access its cash value and then transfer that money into your bank account. This process could take an entire week to complete.
What If You Have No Accessible Investments?
If you have no accessible investments that you can draw from in an emergency, don’t panic. You could use a credit tool. Charge the expense to one of your credit cards, as long as it doesn’t push the balance too close to the credit limit. Or apply for a fast online loan. Online loans can be effective personal borrowing options for managing emergency expenses, especially when you don’t have enough liquid funds on hand. After using a fast online loan, you can make repayments through a monthly billing cycle. It’s that simple.
Not all financial investments are equally accessible. Make sure that you have options that you can rely on right away!
