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Smoke detectors are important in every house, but 16% of Americans have never tested them.1 Having a fire extinguisher in the kitchen makes good sense for obvious reasons. Surprisingly, about 60% of American homes do not have a fire extinguisher.2 Having an emergency cash reserve makes sense too, yet about 25% of Americans do not have one. (3) How can you make the case your client should not be spending everything they earn?
This can be difficult, because your client might not have much spare cash. Prices are going up at the grocery store. Maybe they see savings account rates at the bank at ridiculously low levels. How can you make the case to have access to emergency funds if they need them?
The website bankrate.com provides some useful statistics. 46% of Americans have an emergency fund that would cover three months of expenses. 30% have some funds in reserve, but less than three months worth. 24% have none.3
How can you make the case or provide a plan for getting some backup?
1. Return to the asset allocation model. Clients who invest with you likely have an asset allocation model aligned with their risk profile. Although many articles talk about asset allocation in terms like 60/40 (60% stock, 40% bonds) asset allocation models often have a third component. That is cash. Although this might be considered a reserve for future investing, it helps make the case all their cash should not be in the stock market.
2, What is your client doing with their available cash? When you talk with other financial services professionals, you often use the term “cash equivalent.” This describes Treasury Bills and short denomination CDs. This should logically count as cash reserves because they would be easy to liquidate with minimum penalties in an emergency.
3. What is their bank calling the traditional money market fund? Sometimes banks pay minimal rates on free cash balances yet have another “on demand” account the client needs to opt into if they want to get the highest rate. You might have something similar.
4. Are they expecting a bonus at work this year? Many jobs in industry pay a salary plus bonus. According to Upflip.com in 2024, 51% of companies planned on giving Christmas bonuses and 48% did not.4 This windfall could be redirected to savings.
5. What payroll deduction savings options are available? These might be pretax or after tax options. Does the firm allow for a Flexible Savings Account (FSA) designed for use towards medical expenses? Do they have a company stock purchase program, allowing them to both buy stock at a discount and sell the shares immediately upon receipt? It is easier to save money when it is taken out of your paycheck automatically.
6. Will they be getting a tax refund? If your client is expecting money back when they file their taxes, this could be a source of money for their emergency fund. It is also an excellent reason to file as early as possible.
Here are some other options for emergency cash. These are not as attractive as the first six.
7. Is your client contributing to their retirement plan at work? The answer is probably yes. This can help if the plan has a feature allowing the client to borrow (not withdraw) in case of a hardship situation. This is not the best solution, but it means emergency funds are available.
8. Does your client have a Home Equity Line of Credit? The HELOC allows them to access the equity in their home as a loan. This can be a backup for an emergency fund, but it creates a debt that must be repaid.
9. Credit cards are your absolute last resort. Do not consider your credit cards as an emergency line of credit. Taking out a cash advance on a credit card is very expensive. The average HELOC rate is around 8%, (as of 10/27/25) while a cash advance on a credit card might be close to 30%. This is not what you want to be doing.
Your client needs access to cash in case of an emergency. They need a plan.
Related: How To Avoid Becoming a Pariah on LinkedIn
1. https://www.thezebra.com/resources/home/smoke-detector-safety-survey/
2. https://www.thisoldhouse.com/natural-disasters/21015182/fire-extinguishers
3. https://www.bankrate.com/banking/savings/emergency-savings-report/
4. https://www.upflip.com/reports/christmas-bonus