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Redditors Asked Carrie These Financial Questions. Can You Relate?

Carrie Schwab-Pomerantz on

Dear Readers: Recently, I did my first ever Reddit Ask Me Anything (AMA). I was really excited about it, and not just because my kids are Redditors who constantly seek and give advice on the channel. I wanted to have a real-time discussion with people about something that's weighing heavily on everyone's minds: how to manage your personal finances during times of crisis.

I had a lively two-hour chat with the Redditors and answered about 40 questions on topics ranging from what to do with stimulus money to advice for new investors to suggestions for recent grads entering the job market during turbulent times to whether I prefer burgers or burritos. It was so much fun, and I hope I offered some actionable advice and helped calm a few fears.

I want to extend that conversation to my "Ask Carrie" readers, too, so here are some questions I didn't get a chance to answer during the live event. Curious about what else people were asking. You can check out the full Reddit AMA conversation here.

Three New Questions About Managing Money Today

1) "What would be the best place to park my emergency money? I was thinking of splitting it between a money market fund and a high-yield savings account. I need high liquidity, although I won't need the money for 2-3 years when I plan to purchase a second-hand car. What are your thoughts?"

You actually have two issues here: where to put your emergency fund and how to save for a short-term goal. While they may seem similar on the surface, you really should look at each pot of money differently.

 

An emergency fund needs to be safe, available immediately and only used if you're in a jam -- like a job loss or health issue. Ideally, it should be enough to cover three to six months' essential expenses and kept in a separate account, preferably an interest-bearing checking account, a high-yield savings account or a money market fund. Once it's there, don't touch it until you absolutely need it.

When saving for a goal like a car, it depends on your time frame. Any money you'll need in three to five years shouldn't be in the stock market, so you'll want to be conservative here, too. But you have a few more options. A high-yield savings account or money market account is one choice. You might also consider CDs or a short-term bond fund, which would give you increased liquidity and possibly a bit more of a return -- with a little more risk if rates increase, and interest rates are pretty low across the board right now.

But no matter where you put this money, the most important thing is to keep the two pots separate. Then you can relax knowing you're likely covered in case of the unexpected -- and you can look forward to buying that car when the time is right.

2) "Where should a couple in their mid-30s with two young children and a higher than average mortgage put any extra income? We're looking to invest any savings into something more lucrative for our future."

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