Emergency Fund Planning: My BEST find yet!

A few months ago, my husband and I decided we needed to sit down with a financial planner to work out a game plan for achieving some of our major financial goals. We had three major goals:

  1. Pay off my student loans;
  2. Start saving for our "forever home"; and,
  3. Figure out if there is anything we can do to make our emergency fund work for us.

We've been focused on growing our emergency fund for a few years, so we've been able to save up a decent amount. I was interested to see if we could do anything with it, but had one major concern - whatever we did with it, our emergency fund had to remain available in case we needed it. I was skeptical that we could find something that hit all our needs. I am SO happy to say that Allison Gagni of Gagni Asset Management was able to prove me wrong!

Allison recommended we set up a Brokerage Account to grow our emergency fund. She describes it in further detail below, but if you're anything like me, reading about money and investing can be a little overwhelming. One of the BEST pieces of financial advice I received from my parents was to find a financial planner I trusted and sit down with them. I was able to describe what I have, what I want, and what I'm concerned about. Allison made this whole process easy, approachable, and - I never thought I'd say this - ENJOYABLE. While this was the best fit for my family, your financial planner may have some other ideas - even if you work with Allison (which I'd highly recommend), she may recommend a different product based on your situation. But, I was SO excited about the solution Allison found for us that I asked her to write up some information about it.

So, without further ado, I present the BEST emergency fund solution I've found yet!

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What is a Brokerage Account?
By Allison Gagni

A Brokerage Account is a type of account you open with a brokerage firm.

While there are different types of accounts you can have at a brokerage firm, we are going to focus solely on individual brokerage accounts today. 

Individual Brokerage Account
Similar to an individual account at your bank, an individual account at a brokerage firm offers no tax benefits. You can deposit funds at your discretion & your money can then be invested in different types of securities. You can open an account with or without the help of a professional; it really just depends on your individual needs and experience with markets. Below I’ll go over how they work, what benefits they have, and what you need to get started.

Freedom & Flexibility
The biggest benefit these individual accounts have is the freedom & flexibility that comes with them. Everyone is eligible to open an Individual brokerage account!

You are not bound by contribution limits, earned income thresholds, or distribution timeframes like you are with retirement accounts. You can deposit and withdraw, however much and whenever you want. 

You are also free to invest in whatever securities you like - stocks, bonds, exchange traded funds, or mutual funds.[1] Keep in mind, if you reallocate some of your savings into a brokerage account, it can potentially earn more than what it’s currently earning at the bank.[2]

Another great feature is they have a plenty of liquidity.  Liquidity means you can access the funds easily and immediately, with no cost. As a comparison, a house cannot be converted to cash quickly, a bank CD can charge a fee if you need access to your funds before the maturity date, or even retirement accounts have a 10% tax penalty if you make a withdrawal before age 59 ½.  With many advances in the industry, as well as our cultures desire for instantaneous results, firms will even offer a debit card or checkbook linked to your account for easy access. 

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Accessibility is SO important when working with your emergency fund. You need to be able to access your funds if and when you need them!
- Momma Bear

Margin Accounts
When opening an individual brokerage account, you will need to decide if you want a margin account.  This means you have to ability to take a margin loan that allows you to borrow funds at a specific rate. You can use that borrowed money for a multitude of reasons – investing more in securities, expanding your business, or for personal use. 

What’s great about this feature is the borrowed amount can be working and actively invested in the market!  This could be a great way to leverage your money by taking advantage of the competitive margin rates. As an example, we’ve structured clients accounts to take advantage of low rates in order to pay off their higher interest bearing debts. This allows clients to save money on interest while participating in the market at the same time.

With all the benefits of margin borrowing, it is still not for everyone.  It increases your market risk so it is important to understand your financial situation or consult with a financial professional before implementing a plan.

How to get started
It goes without saying the first thing you will need is cash to start funding your account. If you don’t have much, don’t be hard on yourself- everyone has to start somewhere!  Many firms in the marketplace offer low minimums so you don’t have to wait to build up capital before opening an account.

If you prefer DIY, you can open an account with a major online retail brokerage firm i.e. Etrade, Charles Schwab, Interactive Brokers, or TD Ameritrade.  Each firm will have competitive rates and features so make sure to do due diligence when selecting which would be a good fit for you.

If you are looking for professional guidance or have more questions, my information is listed below.

Allison Gagni
Gagni Asset Management
Investment Advisor Representative
Cell: 361-688-1890
Email: allison.gagni@gagniasset.com 

Investment advisory services offer through Gagni Asset Management, LLC a registered investment advisor

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[1] Exchange Traded Funds (ETF’s) and Mutual Funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

[2]Investing in securities involves risk of loss that clients should be prepared to bear.  The value of investments, as well any investment income, is not guaranteed and can fluctuate based on market conditions.  Past performance is not a guide to future performance.