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Dear Dave: Can We Borrow From Our Emergency Fund For A Non-Emergency?



Dear Dave,

I was recently offered an opportunity to participate in a hands-on stock trading class. The problem is we don’t have the $6,500 registration fee just lying around. My husband and I are on Baby Step 4 of your plan, so what would you think about us borrowing that amount from our emergency fund? We would still have three months of expenses set aside after paying for the class.

Camille

Dear Camille,

I don’t know the exact course you’re talking about, but I do know something about the concept of buying and selling stocks, or day trading, if you want to call it that. I can tell you all the research shows 78 to 84 percent of day traders lose money. And one hundred percent think they won’t be the ones losing out. That includes people who take courses like the one you mentioned.

I have found no data points which show, on a consistent level across a broad population, that people who take a course like that become wealthy as a result. Buying and selling single stocks is an ultra-high-risk proposition. That’s why I don’t buy any single stocks. Now, I know some people who buy and sell single stocks as a very small percentage of their financial world. It’s almost like a hobby for them. A couple might actually make a little money from time to time, but it’s not the main focus of their investment strategy. To hear them, it’s like listening to fishing stories. They’re always talking about the one that got away.

I wouldn’t waste my money on the course, Camille—especially my emergency fund money. Your emergency fund is for, say it with me, emergencies only! 

—Dave   



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