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Published: Jun 29, 2022 7 min read

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Photo illustration collage of a bear upstream waiting to catch some dollar bills out of the water as a stock market graph is superimposed on top.
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It's always important for investors to have cash on hand for emergencies. But when stocks are in a bear market and inflation is running rampant, you may be especially worried about having enough to cover any surprise expenses.

The S&P 500 — an index commonly used to measure how stocks are doing overall — fell into a bear market this month, meaning its price plunged at least 20% from its previous high. While a bear market can be scary, especially after years of stocks hitting record high after record high, it's a good opportunity to take stock of your financial situation.

"Bear markets give all investors a chance to pause and re-examine their investment strategies," says Heather Winston, a certified financial planner (CFP) and director of financial planning and advice at Principal Financial Group.

But when markets are down, it's easy for people to start letting their emotions dictate their actions, she adds. Watching a your balance dwindle can lead to fear and panic-selling.

That's why it's crucial to keep a long-term approach to your investing plan, including how much cash to have on hand. (To be clear, we're not talking about shoving stacks of dollar bills under your mattress or burying cash in the backyard, but instead keeping money where it can be easily accessed without having to face withdrawal penalties and taxes.)