Rashid's monthly expenses are $4000 and he expects that his cash flow will always be sufficient to cover his expenses. How much should he ideally have in his emergency fund?

Question

Quizplus · Accepted Answer

Rashid should ideally have an emergency fund of $12,000 using a combination of liquid investments (e.g. high-yield savings account) and access to credit (e.g. credit cards). This will provide him with a safety net in case of unexpected expenses or income disruptions. While having a higher emergency fund like $24,000 may be safer, it may not be necessary for Rashid's specific situation. The option of having no emergency fund and relying solely on credit is not recommended as it can lead to debt and financial instability in the long run. Additionally, investing the emergency fund in GICs may not be the best option as it reduces the liquidity of the funds and may have penalties for early withdrawals.

Rashid's Monthly Expenses Are $4000 and He Expects That His