Have a young client who is just getting started. Dad saved $ in an investment account and it has about $32k. Client has $0 in savings/emergency funds. How would you handle the account? Continued...

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Number 1. Perfect learning opportunity to live beneath her means and build some savings. Have her view the money from her father as a gift for her future not a life boat for today.

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Thanks for the reply! Agreed on the CC debt.

There are a lot of unknown variables here but my gut leans toward number one. I would just hate to unplug that money from an investment if it’s possible to get the emergency fund built up quickly.

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Keep her invested. Giving her a quick way out will teach nothing. By making her build her emergency fund, AFTER paying off the CC debt over 5-6 months, she will (should) learn to prioritize. Dad didn’t fund her investment account in a week, so why should she get a bailout. If planning for her future is important to her, have her put her money where her mouth is. While it is in the investment account, it is still available for a true emergency. Explain to her the timing risk. Paying off CC or establishing an emergency fund, is not a present emergency.

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If $ is in an NQ account, might be good to start moving it to a Roth.
Wipe out cc debt, teach about cc as LAST RESORT, and save payment to build EmFund.
Would also discuss budgeting basics.

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Yes! It is a NQ account. I was thinking about suggesting moving a lump sum to max out her Roth for the next few years. Really hoping she’s on board with this.

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Would you: 1) leave the money invested and give her the sense of urgency to build up savings/emergency funds or 2) partially liquidate investments to immediately give her emergency fund and strongly encourage her to save/invest what she would have otherwise saved to build emergency fund.

I’m a little torn. Part of me feels like she needs to see the struggle a little bit and learn how to truly manage her money bc she won’t always have a random lump sum of cash to bail her out of bad financial decisions. I’m also nervous to have the money invested, she has a true emergency, and we possibly have to sell investments at a non-ideal time.

1. Emergency fund
2. Start using the funds for annual funding of retirement accounts (help protect the client from themselves
3. Educate the client

Put adequate amount in savings, then have her build up the savings as you DCA an equal amount back into the investment. Emergency money is then there, but you're showing the importance of building savings.

Maybe even the market tanks while you DCA and all the better. The Roth and everything else makes sense too

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