Why an Emergency Fund Comes First

Want to know one of the biggest stock investing beginner mistakes and how to avoid it?

Here it is: Before you invest, build your safety net.

Here’s why. Picture this: you’re all set to start investing. You’ve read up on stocks, opened your first brokerage account, and are ready to watch your money grow.

But here’s the thing—before jumping in, there’s one step that’ll set you up for lasting success and security: Creating an emergency fund.

Why? Because having an emergency fund is like laying down the foundation before building a house. It gives you a buffer, so when life throws surprises (because it will), you’re not forced to sell investments at the worst possible time.

Here are three reasons why an emergency fund is your first financial move.

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1. Protects Your Investments from Life’s Curveballs

Imagine you’ve invested everything into the market, then an unexpected car repair or medical bill comes up.

Without cash on hand, you’d be forced to sell your investments—even if the market’s down.

An emergency fund prevents that, keeping your investments intact so they can keep growing.

When I first started investing, I thought every dollar had to go into the market. I learned the hard way after an unexpected job layoff forced me to sell some of my early investments at a loss. If I’d had even a small emergency fund back then, I could’ve avoided that.

2. Reduces Stress So You Can Invest with Confidence

Investing without a safety net can be stressful. Constantly worrying about what might happen next is the quickest way to feel uneasy about your finances. An emergency fund takes the edge off, giving you peace of mind as you begin investing.

An emergency fund is essentially that "peace" for your money.

It allows you to invest confidently, knowing that you’re covered if things go sideways.

3. Helps You Stay in the Market for the Long Term

Building wealth with investments takes time—years, even decades. The longer you stay in the market, the more your money compounds and grows. But here’s the kicker: if you’re forced to sell when you hit a rough patch, you lose out on that growth.

Did you know? Missing just the 10 best days in the market over 20 years can cut your returns in half. Having an emergency fund helps you stay invested through thick and thin, so you don’t miss those high-growth days.

How to Build Your Emergency Fund Quickly

Set aside a goal of three to six months’ worth of expenses. You don’t need to save it all at once—start small and build it gradually. A little every month goes a long way, and automating those savings can make it even easier.