Ramit Sethi explains why certificates of deposit don't work as emergency funds. CDs lock your money for six months to a year with penalties for early withdrawal, but emergencies need instant access. Keep your emergency fund in cash or a savings account instead.
Can't pull your money out anywhere from six months to a year. It gives me the opportunity to responsibly quit my job because it can operate as an emergency fund while I'm not making an income. Because I know for sure that at any point I need that money. I can go and get it and it's going to be worth more than when it started.
What? What? Okay, again, I need to break this down. She says when I put my money in a cd, it is locked up for six months to a year. That is correct. You have illiquidity. Okay. And so she says, that can be my emergency fund. Well, don't you need liquidity for an emergency fund? Don't you need to be able to pull it out? What she doesn't mention is that if you pull it out early, you're going to pay penalties and fees. Also. Why? What does this have to do with stocks? Nothing. Your emergency fund should be kept in cash in a savings account somewhere. A cd. You can if you want to, but it's not some big advantage over it. I don't know what's going on.
