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Dave Says

Keep it simple and safe

Dear Dave,

My husband and I finally have our full emergency fund in place. Like you recommend, we’ve kept it in a money market account with check writing privileges for easy accessibility. Recently, we heard about short-term bond funds with a higher interest rate than our current money market account. Our money would be available for withdrawal if needed, and we would only lose the interest. Is it okay to move half of our emergency fund into one of these bond funds to take advantage of the higher interest rate?


Dear Ferisa,

Absolutely not! Under no circumstances should you do something like that. An emergency fund is not an investment. You’ll never build wealth and get rich off your emergency fund. That’s not what it’s there for.

I understand this might be the first time in your lives you’ve had a nice chunk of cash in the bank. I also get that it’s hard to let it just sit there and make no money. But an emergency fund is insurance, not an investment. It’s a rainy day fund, and its whole purpose is to sit there safe and wait until life throws unexpected expenses in your face.

Think about it this way. Insurance costs you money to protect things that make you money — like your home. It’s also there to cover things you otherwise would not be able to afford. When you have an emergency fund in place, you don’t have to dip into your 401(k), your IRA, or go into debt. Why? Because your emergency fund provides insurance against those kinds of things.

Let your emergency fund sit right where it is, Ferisa. Besides, it’s a really bad idea to buy bonds in an environment where interest rates are increasing. Bonds have an inverse relationship to interest rates. So, as interest rates climb you’ll lose out if you’re playing around with bonds!


Allow them to earn it

Dear Dave,

Our daughter just turned 10 years old. Is now the right time to start giving her an allowance, and start teaching her about money?


Dear Danielle,

I’m glad you’re going to teach your daughter about money. But in my mind, there’s never a time for an allowance. I believe that kind of thinking, and using words like “allowance,” are some of the best ways to instill an attitude of entitlement in a child. I don’t think you want your daughter growing up with the idea she deserves money simply because she’s alive.

My advice is to develop a method by which she can earn commissions. Write down a daily or weekly list of jobs around the house that are age-appropriate she will be responsible for doing. Then, at the end of the week, she gets paid for jobs she completed — and she doesn’t get paid for the ones she didn’t do. The idea is to teach her that work creates money, and teach a healthy work ethic at the same time.

 Of course, there are some things a child should be expected to do without financial reward. Everyone needs to pitch in, and do certain things to help when they’re part of a family. And once you’ve taught her about the importance and rewards of work, make sure to also teach her about the three uses for money — saving, spending, and giving!


Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at and on Twitter at @DaveRamsey.

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