I want to tell you a story about a client of mine named we'll just call him Joe. Joe called me one afternoon and said, you know, Bob, I found a CD. This was years ago, I found a CD that was paying 6%. I really interested in it. I said, Well, listen, you know, Joe, the risk free rate. And when I say risk free rate, I mean, this is the rate that banks are paying.

And that's kind of like the the benchmark is only 4%. So what incentive would a bank have to pay you an additional 2% when they didn't really have to to stay competitive in the market? And so to me anything when you're looking at an alternative funding vehicle, for an emergency account, anything over the risk free rate is very suspect, and there's some kind of risk that you're taking on. And remember, it's got to be risk free if it's emergency account. Well, he didn't really heed my advice. And he put the money into this and found out that the guy running the bank was running a Ponzi scheme, and he lost every single dollar of that $300,000.

The thing that you got to realize is that there's a lot of scam artists that are out there trying to scam people out of their emergency fund money because they know that in the back of your mind you're thinking, boy, is there something else better that I can do with it. And when it was amazing to me is that there are so many of these scammers that scams that are going on. Just recently, there was a gentleman in the DFW area that was on the radio promising promising guaranteeing a 9% return and a risk free investment backed by real estate, come to find out that a lot of people have invested money with him and come to find out he was running a Ponzi scheme. So anytime that you're presented with an alternative, always go to the risk free rate, check that which is really easy to do today because it's like a quarter percent.

And if there's a big gap over that risk free rate, I would stay clear that unless you are 100%. totally confident in what's You're looking at now I want to talk a little bit about about a debt strategy that this could apply. And it through the years of working with people, I've come across people who have fairly large emergency account. And they got debt, a little bit of debt over here, a high interest rate. And I always, always wonder why they don't just pay off that debt. Because there's a little bit of a strategy with some disclaimers.

By the way, there's a little bit of a strategy you can use, that can work in your favor. So let's say you have $30,000 in emergency account. And let's say that other 30,000 that you have in the emergency account, you have $10,000 debt, you can take $10,000 out of your mercy account, pay that high interest debt off, and then the money you were paying into the debt, pay back into the emergency account until you are whole again at the 30,000. Now if you get through that entire process and don't need the money, that's great. It worked out perfect for you. But if you all of a sudden find that you needed the money, you can always go back to the credit card, either do a cash advance Which is not ideal because is the higher interest rate, or if you can charge the expense on the credit card and pay for it that way as you would have used the emergency account.

The only couple of disclaimers I have on that is that if you pay off that account, the credit card company could choose to close the account. Or they could choose to lower the credit limits. It really depends on the environment that you're in today. We're in a credit happy environment. I doubt that would happen. Now in Oh wait, oh nine we went through the financial crisis.

This is what credit credit card companies were doing to customers, they were shutting accounts down and trimming credit limits, which would be problematic in this particular situation. As I said earlier, this is a priority and I know that that's surprising because not be surprising to you because people just don't really talk about emergency accounts. They look they they know hey you know I need one and typically there's not a whole lot of thought put into it. They're just kind of a got an account with money. That's a catch all account but you got to be intentional about putting Building an emergency account so that you can have a solid financial future.