Quote:
Originally Posted by Taribor
I don't see how a CD is considered "liquid" and stocks are not. If you have 12,000 EF and per your plan, $1000 matures each month, then wouldn't that mean you really only have access to $1000 of your emergency fund at any given time? I've never used CD's so my question is probably an ignorant one  |
Speaking as someone who used 90 day CDs for an EF, here is the way it works with my bank and budget.
Budget- february paychecks accumulate and pay for bills in March. Meaning we have one months bills on hand at most times, more or less. I get paid 2X month, wife gets paid every other week. So there is some balance and planning needed to make this happen (takes 5 bank accounts), but 3 of the 5 bank accounts have next months bills in them (the exceptions are the cash account and car payments).
In addition, my IRA contributions are $875/month. 401k is another $1000/month. We can increase budget by about $1800 of cash flow by turning off retirement accounts. Meaning if we knew of the problem, we would first try to solve it within cash flow (and not touch EF).
bank- the CDs mature every 30 days, then roll into another 90 day CD. We have 3 90 day CDs, one maturing every 30 days. We have a 10 day "look back" period (I think that is what they call it), where I can access the CD 10 days after it matures without penalty.
So I have a 20 day window each month where no CD is technically available without penalty. The CD is 4k, the interest it generates is around $80. I will forgo the $80 to get access to the $4000 if I need money in that 20 days, assuming the cash flow issues above were not good solutions.
We also just opened an account in PRPFX- a moderate mutual fund, to accumulate long term monies for house payoff and house repair (like roof, gutters etc...).