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Unfortunately, unforeseen circumstances can force us to
draw on money in long term investments for needs. This can
result in a loss, either from withdrawal charges or penalty
fees, or through having to sell investments when their market
price is down.
By keeping some funds set aside in an accessible, short
term investment (such as a cash management trust) you can
avoid this situation.
Once you have your short term needs taken care of, you
can embark on a longer term investment plan, confident that
your long term investments will remain just that - long
term!
Although most Australians still typically prefer to invest
in property, it is unfortunately one investment which is
almost impossible to call on quickly in an emergency.
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Joan
Age 53
Joan's financial planner had always stressed the need
for liquidity. "It never really made sense to
me," says Joan. "I wanted to get the best
return possible from my money and I knew that to do
so I had to be in assets like shares and property.
As I was working and didn't need to use my savings
it seemed a bit backward to keep some money just sitting
in cash. Nonetheless, I did as my planner recommended.
"About a year ago my daughter,
who was living in London, was in a car accident. She
had to have emergency surgery and weeks of follow-up
treatment. Thanks to my separate cash fund, I was
able to get on a plane almost straight away and fly
over there to be with her.
"If I had to, I would have sold
some investments to be with my daughter. Even so,
that might have taken a week or so to sort out - and
I could have lost quite a bit of money having to sell
investments at a bad time. At a really stressful time,
it was an enormous relief to have an emergency fund
to call on."
Reproduced with the kind permission
of FPA and Macquarie Investment Management Limited
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