Question

6 Carla would like to buy a dress, a dresser for her bedroom, and a home theater system. She has one month's worth of living expenses in her emergency fund. Carla decides to save for the home theater system. Did Carla make the right decision? Why or why not?

A.
Yes; her emergency fund is full and the other items will probably be less expensive.
B.
Yes; she could save more for her emergency fund, but the home theater will be harder to save for.
C.
No; she should save more for her emergency fund because she has saved less than the recommended amount.
D.
No; she should have bought the dress and dresser first because she could afford them right away.
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Answer 1

The answer to the case illustrated in the question given is (C) No; she should save more for her emergency fund because she has saved less than the recommended amount.

This is because her emergency fund is actually less than the amount that most people recommend you should have: which is at least around 3 months’ worth of your living expense. It is even better if you can save for at least 6 months’ worth of your living expense.