Being a fan of the stock market means that trading often ends up being my number one priority when it comes to personal finance. I love trading, but truth be told, I often am very well-aware that I should be investing more money into an emergency savings account.
Don't get me wrong; the stock market has been very good to me. I want to be the next Warren Buffet. The truth is that I still realize that having at least $1,000 in an emergency account is crucial to my financial wellbeing.
What shocks me is how many fellow investment fiends don't think they need to have emergency savings. If you don't believe that you need that extra cash, consider the following reasons everyone should have an emergency fund—regardless of the stock market's performance.
You can lose everything in the stock market.
If there's anything that the worst crashes in the stock market's history taught us, it's that it's perfectly possible for a booming economy to crash hard sooner than you could imagine. That's why experts tell you that you shouldn't invest money you can't afford to lose.
During times when stock markets crash, you won't be able to access all the money that you put in. This means that it will be your savings account that keeps you afloat. Even if you feel totally confident in the way the stock market works, you should have an emergency fund just in case.
Trying to get cash out of trading accounts is slow—and emergency funds allow you to access money quickly.
I'm just going to point out that most trading accounts, even when it comes to apps like Stash or TD Bank Ameritrade, will require you to wait a couple of days before you can access the money you want to withdraw. Though this doesn't seem like a very big deal, it's actually a huge issue.
During an emergency, being able to get money right then and there is often the deciding factor between being able to make ends meet and being unable to make it through the night. If anything, you should have an emergency fund just to make sure that you don't end up in a sticky situation while you wait for cash to clear.
In today's economy, no paycheck is certain.
One of the biggest reasons that people should have an emergency fund regardless of how much they have in the stock market is the way the modern economy works. People lose their jobs at the drop of a hat, an when that happens, you can't always rely on stock market returns to prop you up.
This is the primary reason why finance experts now say you should have an emergency fund that covers at least six to eight months of finances. You simply can't expect to find a job that quickly anymore, and if you aren't careful, it could lead to financial devastation.
Having an emergency fund can also help your dating life.
Both men and women need to be very careful when it comes to dating and money. The smartest advice I ever saw when it came to dating was to have an emergency fund specifically dedicated to covering your butt in the event of a breakup or divorce.
If you don't believe how much a simple emergency fund of $1,000 can do, you might want to read The Billfold's "Story of a F*ck Off Fund." It can save your life, and help you get out of an abusive relationship—or an abusive boss.
No one is immune from these kinds of things happening, so if you want to be able to survive, make a point of keeping your savings at hand in a place where others won't know about it.
A savings account can keep you away from further debt.
Debt is bad, okay? When you have an emergency and you don't have the funds to cope with it on hand, you end up in debt. Most of the time, this comes in the form of credit card debt.
Credit card interest rates will quickly eat up your bank account—which is why every financial expert out there will tell you to avoid credit card interest like the plague. Having a savings account means you won't have to go in debt when things hit the fan.
Savings can also help you become financially independent.
Most people in America are not financially independent, even if they are avid investors in the stock market. The truth is that most people who invest still will rely on a paycheck to get through the month.
For many people who are financially independent, having an emergency fund is part of the reason why they feel relaxed. After all, when you no longer rely on a paycheck to make ends meet, you really have to be careful that you don't lose that independence in the event an emergency strikes.
Let's not forget the potential of dealing with medical bills.
You might be fit as a fiddle right now, but what happens if you end up in a car accident? It could take a while to actually have insurance pay out. Similarly, you never know what could cause you to get seriously sick. Keeping healthy only can work so much.
A shocking number of people have no healthcare savings at all—and end up bankrupt the moment disaster strikes. If you want to avoid getting bankrupt due to medical bills, you should have an emergency fund that will be able to foot the bill.
Sometimes, having something that's steady and there offers peace of minds that stocks don't.
Stocks are volatile by nature, which is why they're seen as high-risk investments. The fact is that you can do a lot with them, but seeing them rise and fall can make anyone feel a bit scared for themselves. As a result, you might be better off doing some saving instead.
Trust me when I say that seeing that saving number slowly growing without ever decreasing will make you feel a lot safer and a lot happier.
You also can't trust social security and welfare to help you if things go downhill.
Though there once was a time where people who were on welfare could feel comfortable relying on it, that time is long gone. Budget cuts are affecting everything from subsidized healthcare to public housing.
The safety nets that were once there no longer are—and that means you should have an emergency fund just to make sure you won't end up in the streets. Safety nets no longer exist, and relying on your portfolio as a safety net is not a bright move.
Stocks don't offer the safety that cold, hard cash does. Cash can keep you off the street if you use it wisely.
Finally, avoiding using your stocks for emergencies leaves them room to grow.
One of the best reasons why every trader should have an emergency fund is because it ensures that your stocks remain untouched and are able to increase in value.
Compound interest is a great tool for your wealth building, and if you want to take full advantage of it, you should have a savings account that will allow you to keep that stock portfolio untouched during times of an emergency.