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How Behavioral Economics Can Build a Cash Reserve

When I was in business school, one of my professors mentioned a case when an Executive Director that she knew had to raid her retirement accounts to make a payroll. The group was funded by a large source whose payments were reimbursements, and the cash reserve was inadequate for the perfect storm of payables. The money came in eventually, but I think we can all agree that this type of financing is a really bad idea. The fact is, 46% of respondents to a 2015 Federal Reserve Board survey mentioned that they would have trouble coming up with $400 in an emergency.

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