How Important Is an Emergency Reserve?

[Retired To Win]

I've detailed in my latest blog post (see link at upper right hand corner) how important having an emergency reserve is to me. How important is it to you to have an emergency reserve?

In that blog post, I also made a differentiation between a cash reserve and an emergency reserve -- which in my case, includes not only a liquid bank balance but also food, cash money held at home, silver coins, and substantial available credit card lines. Which of those do you -- or would you -- include in YOUR idea of a financial or emergency reserve?

[cschin4]

A reserve can take different forms. For me, having a reserve simply is about having the financial means available to take care of myself in the event of a crisis, job loss, disability, etc. I did take out a Line of Credit on my home that is available. I havent' used it but if need be, I can tap that for some dire emergency. But, the biggest thing I did this past year was consolidate my wealth into a wealth management group. Not saying that is for everybody. But, for me, I have all of my money in an easy to access way for buying selling and trading. Prior to that, I had mutual funds all over the place which would have been very difficult to access or withdraw from or make changes. For me, this has greatly enhanced my ability to manage my money across the board. And, it isn't invested in one product if that is what you are thinking. It is still in assorted stocks, mutual funds, etc.

[disneysteve]

I've detailed in my latest blog post (see link at upper right hand corner) how important having an emergency reserve is to me. How important is it to you to have an emergency reserve?

In that blog post, I also made a differentiation between a cash reserve and an emergency reserve -- which in my case, includes not only a liquid bank balance but also food, cash money held at home, silver coins, and substantial available credit card lines. Which of those do you -- or would you -- include in YOUR idea of a financial or emergency reserve?

I think it is vitally important to have an emergency fund. I think a good chunk of that needs to be liquid, so banks accounts, money market accounts, cash on hand, etc. Depending on your situation, I think it is okay for some of your reserve to be in less liquid form since you aren't ever going to need your entire emergency fund at one time. I can't think of any emergency where I wouldn't have at least a few days to a few weeks or even months to access the money.

I don't buy precious metals so I wouldn't personally have silver coins in my reserve.

I absolutely don't count debt as a cash reserve. What good is racking up debt in an emergency if you don't have the money on hand to pay the bill when it comes? I see nothing wrong with paying for an unexpected expense with a credit card as long as you pay the bill in full. I do that all the time but I don't include my available credit as part of my emergency fund.

[cschin4]

I don't count debt as cash reserve either. In fact, I have no debt of any kind, not home, car, student loan, nothing. But, when I paid off my home, I thought a Line of Credit would just be an option worth having. And, very unlikely I will ever use it but I like to keep options open.
I think the real key to life is simply learning to live BELOW your actual means. Something that most people just don't want to do. If you do this as a practice, you can have financial peace of mind.

[disneysteve]

I don't count debt as cash reserve either. In fact, I have no debt of any kind, not home, car, student loan, nothing. But, when I paid off my home, I thought a Line of Credit would just be an option worth having. And, very unlikely I will ever use it but I like to keep options open.

Nothing wrong with having available credit. Between my wife and I, we have nearly $100,000 available on our credit cards. I just don't count that as part of our emergency fund because it isn't money, it's debt. Granted, in a catastrophic emergency (not sure what that would be exactly), if we burned through all of our money, we might be forced to turn to debt as a last resort but I can't imagine that ever happening. We have sufficient savings to cover the routine stuff and we have insurance to cover the big stuff.

[cschin4]

After a natural disaster, I do think that perhaps I should have some stash at home. I mean in a power outage or severe weather, etc if the ATMs don't work or whatever, do you have a cash stash or other things like water, generator, etc?

[disneysteve]

After a natural disaster, I do think that perhaps I should have some stash at home. I mean in a power outage or severe weather, etc if the ATMs don't work or whatever, do you have a cash stash or other things like water, generator, etc?

I do keep cash on hand. We don't have a generator. I figure if our power goes out, we'll load up the car and head somewhere else (we've done that more than once). We have some water and non-perishable food on hand but not in the amounts the survivalists recommend.

[97guns]

i have kept over 10K cash at home for years and never used it, now my emergency, retirement, personal and business funds are all melded into one big block of precious metal

[greenskeeper]

I do keep cash on hand. We don't have a generator. I figure if our power goes out, we'll load up the car and head somewhere else (we've done that more than once). We have some water and non-perishable food on hand but not in the amounts the survivalists recommend.

you can get a decent genset for around $500 these days. Might be something to consider. Personally having a genset on hand allowed us to stay home comfortably during an ice storm (no power for 7 days) and hurricane sandy (no power for 6 days). 5 gal tank on the genset lasted approximately 3 days running 24/7. Far cheaper than driving somewhere with amenities.

[QuarterMillionMan]

I like the way this thread is evolving and how I wish I owned a house to prepare for a doomsday scenario with generators, guns, survival gear, etc. But since I live in an apartment all I can do is store limited foods and cash. For instance I keep $1000 in small denominations of $1 bills, $5 bills, and $10 bills stashed in case of emergencies. And if God forbids let's say in the worst case scenario the economy goes thru another 1920's type depression era crashing the economy as a result of all the "Quantitative easing" causing chaos and rioting, I'd be doomed. I could gas up my truck and try to leave but I'm guessing just trying to get gas will be a battle. Scary to fathom.

[Retired To Win]

After a natural disaster, I do think that perhaps I should have some stash at home. I mean in a power outage or severe weather, etc if the ATMs don't work or whatever, do you have a cash stash or other things like water, generator, etc?

Thinking about the several big time hurricanes and snow/ice storms that I have gone through is a big part of why I revised my emergency reserves plan to include cash at home, silver coins and longterm food stores. We do have a "whole house" propane-fueled generator (that has followed us from house to house for 3 moves, now) but -- honestly -- I hadn't considered it as part of my emergency reserve. But I guess it is!

[HalfDozenDaily]

All of our emergency reserve ($11K) sits in our bank... thinking I should perhaps start keeping some "cash on hand" just in case. No idea how much our *magic number* would be however.

Any suggestions? We're a family of 6...

[snafu]

Having once coped with an instant evacuation, I naively grabbed useless stuff like a bag off canned food but no can opener. We now have a large trash can of emergency supplies stored in the garage. Old back packs hold emergency supplies in the trunk for each car. Because ATMs go down or run out of cash, we keep a stash of cash hidden in the car and several hundred dollars in our home safe.

I've changed my thinking on large, liquid sums for EF. I've continued with accounts for home and vehicle maintenance and unexpected problems/challenges but major sums are mostly invested knowing I can turn it to liquidity in 2 business days. It works for me and my belief that I can tolerate that level of risk.

[LivingAlmostLarge]

Very. But we are a family of 4 living in a HCOLA on one income. We have cash in a savings account and writing this and I realized about 1 year of cash.

[feh]

The importance and form of an EF will vary greatly from family to family, person to person. A few notes regarding ours:

• we have 3 months of living expenses in an online bank
• we have 18 months of living expenses in short-term investments (bonds, CDs) that could be liquidated
• our EF doubles as "an occasional large purchase" fund
• we have 2+ years of living expenses that could be taken from Roth IRAs
• we have no debt and my job is very secure

None of this would apply to somebody with tenuous job security and no savings.