Tag: risk

Entrepreneurs: The New Adventurers

I am 3 days into the new Intro to Entrepreneurship class that I am teaching to 24 high school students this year. I am already having a blast, as the students—mostly freshmen—are very enthusiastic, despite several of them not being quite sure what entrepreneurship was 3 days ago. We started off by analyzing the etymology of the word entrepreneurship. Etymology is underrated as a tool for studying concepts like this. You get a peak into the cultural perspective of the time and place where the word was first invented. How cool is that?! Continue reading “Entrepreneurs: The New Adventurers”

Advertisements

The Case Against Emergency Funds

Most financial advisors will probably tell you to establish an emergency savings account. I personally am a fan of the emergency fund strategy, but it is different for every person, depending on what kinds of risks they have in their lives. I talk with my finance classes about different types of risk we are exposed to:

  • Concentration risk
  • Income risk
  • Inflation risk
  • Interest rate risk
  • Liquidity risk
  • Personal risk

Emergency savings can help with some of these risks, like a medical emergency or job loss, but they lose buying power to inflation, and they have an opportunity cost. The question is which of the risk factors above carries the most weight for you. If you work in a highly volatile industry, income risk may be a major concern. If you are a contracted teacher like me, maybe not so much. This is why it is important to “play devil’s advocate” and make arguments against conventional wisdom in finance. Let’s examine the argument against establishing the infamous emergency savings account. Continue reading “The Case Against Emergency Funds”