Emergency reserve
Certified Financial Planner glossary · Certified Financial Planner
Definition
Liquid savings sized to cover essential expenses through a job loss or shock before investing surplus aggressively.
Emergency reserve in plain English
A planner wants to open a brokerage account and fund an irrevocable trust while the client has two weeks of cash in checking. An emergency reserve is liquid savings sized to cover essential expenses through a job loss or shock before surplus gets invested aggressively. Recommending equity risk or irreversible estate moves before that cushion exists is premature and violates risk-before-return thinking. Build the cash floor first, then allocate what remains.
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