3 or 6 month emergency fund? Also, how long did it take you to complete?


#21

I guess that this brings up a good point, once you are FI, the emergency fund can get a lot smaller.

You may still need it for medical or a sudden large repair, but the fear of losing your job goes away.


#22

Built up years of savings 25 at current count. At first it was 1 year every 5 and now it’s 1 year every year thanks to a 45-55% savings rate. Emergency funds offer peace of mind. This is what we felt we needed to believe we could finally feel that way. Keeping consumption lower is key to stretching that emergency dollar (or in our case what we generally call “liquid courage”).


#23

How is this allocated? Are you considering all of your investments as your emergency fund?


#24

Fair question and I realize I’m blurring the lines between FI fund and Emergency fund.

Nothing that’s in pension/tax deferred status. Everything else is deemed as “available”. The reality is that most of us consider anything outside either of those categories as available when facing a crisis. Also 3-6 months of expenses is based on usual/low expense/no-one-time-items levels. I don’t know how a medical emergency, permanent disability, etc. figures into an amount that small.

Maybe we need to think of it as “tide us over” emergency fund and a larger life-changing “fire alarm red” emergency fund to built once the smaller one is topped up. I needed to have that larger one to feel comfortable. I guess you could call me risk averse.

I’d also say that depending on how tight things are at any given moment, our view tends toward the short to longer term view. (The Scarcity Effect)


#25

Interesting. To me the concept of emergency fund is the indicator that if I’m still short on money I’d need to get some work temporarily. <- Assuming you’re in FI… which sadly I am not yet.


#26

Just the one month. My job is very secure (and I have disability insurance), our health stuff is covered since I’m in Canada, and the rest of my investments are easy to sell if ever needed (like the stuff in my TFSA). I sometimes wonder if I should have more, since it seems like such a big recommendation from basically all the PF people… but I haven’t ever felt the need.


#27

I keep a couple of months in hand, (across 2 financial institutions), even though my husband and I have guaranteed pension income.

Why? I think it is just a basic level of insecurity. The UK crash in 2008/9 unsettled me when I realised we had everything invested in one organisation. (salary, cash savings, shares etc). That organisation came very close to failing, and I realised that we wouldn’t even have been able to get money to buy food, even though we might eventually have got some of it back…

So since then, I have at least 1 or 2 months cash in hand in each of 2 banks. Yes I might lose some interest / growth, but I sleep better at night.

Add to that, the various European crises in Cyprus 2012 / Greece 2015, where the banks were shut for days, and access to cash restricted, so I also keep about £500 in ready cash, just in case… (I also keep the tank pretty full of gas.)

And I’m normally an optimist…


#28

We keep 12 months liquid and another 4-5 months in savings bonds. Why so much? We have one income (mine). Back in the 2009 Great Recession my husband lost his job, right after I started my MBA and we had just bought a new car (of course-those things never happen just after you made a huge deposit in savings).

We’ve also been through a tremendous health crisis where my husband almost died of septic shock four and a half years ago, and we’ve had consistently large medical expenses since then. So I keep a large emergency fund in case I lose my job, need a huge house repair, need to pay for care for my kids, and/or medical expenses.

How long did this take? About 15 years. I remember when I was starting out I felt it was taking forever to get one month. It’s gone up and down over that time, particularly as we’ve been through those emergencies. With every huge emergency I’ve increased the goal because my need for security went up. I know I’m giving up returns but it’s worth it to me for peace of mind.


#29

We currently have about 6 months of savings. We used to have about a year banked up but used that during a career transition and a down payment for building our house. We are self-employed teachers so summer is our lean months, so we try to put away extra during the year to cover living expenses, mortgage, and vacation.

Once we get our house paid off in 6 or 7 years, we will be able to stockpile our cash again.


#30

Wellll… I’m afraid to admit to you PF peeps… I currently have 20 months and growing. My name is Miss Mazuma and I am a cash hoarder.

I know I know, I’m cash heavy and “should” be investing it…but my savings account has a 4% interest rate (up to 50k) and compounds monthly. I’m currently making over $100 a month in interest. I could definitely do better in the market but this is guaranteed cash keeping up with inflation…$1200 a year! Plus it makes me happy to see it there. :slight_smile: When I finally max out the 50K I plan to work on an actual cash fund of 2k (Mexico cash in case I have to flee the country) and the the rest is going to the market. Oh, and a few of you are aware of my addiction to real estate. That’s another reason I keep it so high…in case the right place pops up I want to be ready to pounce!

Thoughts?


#31

Thanks for sharing your story. Do you have the savings bonds spread out so that they mature at different times or do you have them all bought around the same time?

We all have different stories and have gone through many different “emergencies” during our lives. Sounds like you’ve been through a bit of a rough patch, but at least you’ve taken the time to create and execute on a plan!


#32

So you are going to be comfortable being around the 6 month mark until you get your house paid off? What’s the change in mindset? Retirement? Acceleration of house payments?


#33

20 months and counting! That’s pretty solid! I love that there are so many routes to take on our personal finance journeys! Sounds like you have a great plan for your future and how you manage your money! Thanks for sharing!


#34

We are putting a few hundred dollars away into savings each month to rebuild our cash reserves. We are putting a larger focus on house payments at the moment. Our minimum payment is $660/month for a 15-year. We plan on paying $1,000 per month (summer months might just be the minimum due to our variable income) and that gets us debt-free in about 7 years.

Our monthly goal is to put 10% of our income towards retirement. I know a fair amount of people think focusing on retirement, & investing in general, is the better option as our mortgage rate is 3.25%, but, my wife & I do not like debt and monthly payments.


#35

I have about 8 months in the Vanguard Lifestyle Conservative Growth Fund, which is a 60/40 mix of bonds and stock. I never felt the need to keep this money in cash, although I do have a car fund in cash for whenever I end up owning a car (so could always use that in an emergency as well).

I can’t remember how long it took to build, but probably quite some time.


#36

Sweet lord what bank is giving you a 4% rate on a savings?


#37

That’s exactly what I was wondering. Please do share @MissMazuma !


#38

We have about 2.5 months right now of current expenses, but if we had an emergency we could get our hands on another months worth in a day or two (standard brokerage account). I actually put a Emergency Plan together on what services we would cut day 1 of an emergency along with reducing our accelerated debt payoff on our student loans.

It took us about 2.5 years via auto withdrawl on payday - threw a few financial windfalls at it as well (we were investing a significant amount of money along the way to)

4% interest! WHATT!!!

I think I get 1% in our online savings account


#39

I don’t know how to reply to both of you at the same time so I hope I did this right! @sethdrebitko I belong to my companies credit union but you have to be an employee (or married to one) to qualify…SWACU.org

It’s actually a checking account. You need a direct deposit and 15 debits a month to qualify for 4% otherwise the rate drops to .1%. You can have two accounts and each one will get 4% up to 25k. So 50k total gets 4% interest. If you go over, the extra money only gets .25%.

Here is a little tip for those of you who need to make a minimum amount of swipes to qualify for something…

I ordered a Square reader to be able to make swipes of my card on my iPad. I set my swipes to be credited to my checking account. I make 15 swipes a month (per account) for $1 each (that is the minimum charge Square allows). Square charges 2.5% per swipe rounded up to 3% per transaction. Each dollar I swipe gets charged .03. That is 45 cents every month per account = 90 cents subtracted from the $30 I charged my cards. The other 29.10 goes right back into the checking account I set up with Square. This way, I get my swipes for the month done without having to buy a bunch of unnecessary crap. To me it’s worth the 90 cents to get $100+ Per month in interest. :slight_smile:


#40

Wow - this is awesome! Nice work!