You Should Never Do This with Crypto

There are a handful of mistakes that you don’t want to make with cryptocurrency. You don’t want to fall for scams and lose big. You don’t want to forego research and jump onto the first opportunity that comes across your screen. And you certainly don’t want to underestimate the need for security and put your investments at risk.

You know that these are big mistakes that you’re better off avoiding. So, what else should you never do with cryptocurrency?

The answer is: you should never use your emergency fund to invest in crypto.

Using Your Emergency Fund for Crypto

It’s easy to see why this may seem like a good idea at first. Your emergency fund is a large stash of savings that’s sitting untouched, which makes it the perfect funding for your next big purchase of cryptocurrency.

One reason why you should never do this is that it removes an essential safety net from your financial portfolio. You should have an emergency fund that you can depend on when urgent, unexpected expenses pop up. It allows you to pay for these expenses quickly without disrupting your regular budget or jumping into debt.

And if you have a lot of savings stashed away in your fund, you can use it to stay afloat during times of crisis. You could use the savings to cover your monthly expenses if you lose your job and have yet to find a replacement, or if you get sick and you need to take weeks away from work to recover.

Don’t take this safety net away from yourself. You’ll need it to maintain your financial stability during the worst times.

Crypto Isn’t Helpful for Emergencies Either

What if you intend to use your crypto investment to help you with emergencies? It can seem like a good plan to increase your savings through crypto, thereby giving you more funds to rely on when you have to manage urgent, unexpected expenses. Unfortunately, that strategy won’t work very well with cryptocurrency since it is notoriously unpredictable. You could have nothing to help you when something goes wrong.

You’ll want to have an emergency fund that is reliable — not one that could disappear at a moment’s notice. This is the benefit of having a standard emergency fund sitting in a savings account. You can rest assured that the money that you’ve saved hasn’t disappeared without your intervention.

What If It’s Too Late?

You made the mistake of using your emergency fund to purchase cryptocurrency. So, what can you do? If you’re dealing with an emergency expense and you don’t have the savings to deal with it, you can apply for a cash loan online to help you pay for it in a short amount of time. As long as you meet the qualifications for the cash loan, you should be able to apply quickly. If you’re approved, you can use the funds to manage your emergency and consider repayments later.

After that, you will want to focus on rebuilding the safety net that you eliminated. Every month, you should move some savings into a separate account and let it grow — this will be your new emergency fund.

If you think it’s wise to do so, you can cash out your cryptocurrency and use that money to replenish the emergency fund. Expect to deal with cryptocurrency exchange fees when you do.

Now you know why this investment strategy is a big mistake. Avoid it at all costs!

Photo Credit: David McBee via Pexels

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