eMoney Tip of the Week: Setting Up Emergency Funds

One of the pillars of sound financial planning is establishing a reserve fund in case of emergency.  The amount to set aside varies by client, but typically depends upon the size of the household, how many income streams they have available, and often ranges between 3-6 months’ worth of the client/household’s monthly salary.

To create an emergency fund in the eMoney System, enter a cash account and exclude it from liquidation to ensure it is not being used to cover normal cash flow deficits.  

To exclude an account, navigate to the Expenses  section of the advanced fact finder, and select Liquidation Strategy.  From here, select the “Exclusion” tab and select the emergency fund to exclude this from liquidation due to cash flow shortfall.

You can demonstrate the importance of having an emergency fund in a plan/what-if scenario when there is an event that requires liquidity by entering an unplanned expense and using the emergency fund to cover this expense.  To do this, head over to the Funding tab of the unplanned expense and then designate the emergency fund as the funding source.

In addition to an emergency fund, you can also show savings/contributions into taxable accounts and Roth accounts with a transfer flow (post-tax), while using the Contributions tab of a qualified investment for pre-tax savings.  You can use the Decision Center along with the Cash Flow Savings report to see how setting money aside can have a significant impact on a client’s financial goals.  Keep in mind that if a taxable investment or tax-deferred account is tapped to cover a deficiency during any cash flow simulation, then this may not be the most efficient method since there could be tax implications resulting from the spending withdrawal.

If you have further questions or concerns, please don’t hesitate to contact Customer Support so a team member can assist you further.  You can reach them at 888.362.8482.