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Most enterprises have at least some cash reserves. This is important because these reserves can meet daily expenses relatively easily. It is not uncommon for enterprises to reserve special funds (such as emergency or emergency funds) to effectively create resources that can be used when the company has some unforeseen expenses. For example, the cash reserves retained in the emergency fund can be used to continue to pay employees when repairing facilities damaged by natural disasters, or for maintenance costs.
Even single families can benefit from the cash reserves on hand. Many financial advisers suggest that a family has enough reserves to last for at least six to eight months without generating any income during this period. One of the most basic ways to start building this reserve is to open a simple savings account and deposit a certain amount directly into the account in each payment period. A capital buffer equivalent to the average household expenditure of six to eight months can help alleviate the worries about the spread of diseases or unemployment, and enable families to concentrate on overcoming temporary obstacles and resume income flow at some time before the reserves are exhausted.
In most cases, cash reserves are kept in accounts, and there is little or no penalty or value loss caused by withdrawing funds. Both enterprises and individuals can choose to deposit funds into bank accounts without interest, or they can punish account holders for withdrawing in advance without deducting the accrued interest generated by account deposits. In the United States, short-term treasury bills and certificates of deposit are also excellent ways to build long-term cash reserves, which can avoid a lot of fines when withdrawing funds to deal with unexpected expenses or financial reversal.