Who else has their emergency fund invested?

[Nika]

I keep hearing "keep it in cash, EF is not something you take ANY risk with" on these forums and as financial advice on TV. And it makes sence, but only to a certain point.

We live in a HCOL, and I am happy that we finally just got to a point where we have an 8 month EF, or almost 6 months of our take-home salary. That is all we have outside retirement accounts.

The thing is, that is over 50K and it just does not make sense to me to have none of it invested and erode by inflation.

So we have the first 17K in liquid (savings account/cd)
The next tier is in mutual funds - about 20K
and the last tier is in stock (30 shares of Apple and a little bit of Mattel).

I understand if all you have is one or 2 months, or just enough for a major car repair, you should keep it liquid. But would it really make that much sence in our situation? We have two stable jobs that are not dependant on the economy and want to maximize our savigns for the benefit of our family. Do you believe "EF should be cash only no matter what" or would you think that 50K+ sitting in cash, doing nothing is excessive?

[bjl584]

EF are unique to your particular situation. If you have a stable job and low expenses, then you don't need as much of an EF, or you can afford to be a bit riskier with your EF. Just so you have enough liquid cash to tap for a real emergency, then I think that you have covered your bases.

[disneysteve]

Do you believe "EF should be cash only no matter what" or would you think that 50K+ sitting in cash, doing nothing is excessive?

EF are unique to your particular situation.

I agree with Brian. It depends. I can't imagine any emergency that would require us to access 6 months of living expenses all at once. A job loss, a medical crisis, a family funeral, whatever. In all cases, we would need some money upfront and then need the rest over a period of weeks or months to sustain us and pay bills. Everyone definitely needs a completely safe, completely liquid reserve for those immediate needs but assuming your situation is stable, I see nothing wrong with having a tiered EF.

[feh]

Just had a similar thread not too long ago:

http://www.savingadvice.com/forums/personal-finance/63819-survey-where-do-you-stash-your-emergency-fund.html

[kork13]

Likewise. I do a similar thing with my EF, though not quite so aggressively... I keep ~1 month in a cash savings account, and the rest I've put into federal I-Bonds. Still very safe, but the interest rate is better.

As long as you're comfortable with how you have it spread out, I see no problem with investing some of your EF.

[humandraydel]

I have absolutely NO problem with an EF being partially invested - in fact, I would encourage early savers to put part of their EF into a Roth because the likelihood they actually need all of it is low. However, I can't recommend having $15,000 in AAPL. Yes, I know it has been a fantastic investment, but any single stock as 1/3 of your EF is WAY too risky.

I prefer something like: 1/3 (2 months expenses) in each: cash, short term bonds, total stock market index.

[LivingAlmostLarge]

Invested part of our EF as well. There is a point where cash is good, but building a taxable account is also good. And if something happened all of it would be used right?

[thekid]

We keep all our EF in high interest savings accounts (such as ING) and CDs. We do not wish to put the capital at risk, even if there is, at current interest rates, as slight erosion of capital to inflation. We don't invest in stocks any money that we may need in under at least 10 years.

[Slug]

I have absolutely NO problem with an EF being partially invested - in fact, I would encourage early savers to put part of their EF into a Roth because the likelihood they actually need all of it is low. However, I can't recommend having $15,000 in AAPL. Yes, I know it has been a fantastic investment, but any single stock as 1/3 of your EF is WAY too risky.

I prefer something like: 1/3 (2 months expenses) in each: cash, short term bonds, total stock market index.

I share this concern. Think about a diversified ETF like PERM or anything to lower volatility.

[michelleosborn]

I keep my EF in a money market account with check writing ability.

I would love to have it earn money for me, but the point of an EF is for security not for income.

It's function is to have the cash on hand if you need it fast. Too much time & headache to get to if invested not to mention the risk of loosing it no matter how well diversified.

I tell my clients, if you invest your EF then it's no longer an EF.....it's an investment.

The only thing an EF should earn you is peace of mind.

[greenskeeper]

EF is around $20k, in an ING savings account, at a crappy 0.80 APR.

[MonkeyMama]

I tell my clients, if you invest your EF then it's no longer an EF.....it's an investment.

The only thing an EF should earn you is peace of mind.

Exactly - what I was going to say. An investment is an investment. An EF should not be invested.

I also think an EF is a more important concept to someone younger/starting out. I think for many, their investments can be used to cover an emergency type situation. But then I'd just call it an investment. But, you know, if I had $500,000 in well diversified/readily accessible investments, I think a super large emergency fund would be kind of unnecessary. But an emergency fund will save your butt when you have nothing else.

I do think it's somewhat just semantics.

[maat55]

For a while, I was fortunate that my EF was earning 4.1%, then it went to 3.1, it may now be 2.97%.

I have considered putting a portion into silver, but have not done so, yet.

[disneysteve]

I also think an EF is a more important concept to someone younger/starting out. I think for many, their investments can be used to cover an emergency type situation. But then I'd just call it an investment. But, you know, if I had $500,000 in well diversified/readily accessible investments, I think a super large emergency fund would be kind of unnecessary.

I agree. This isn't something that often gets mentioned because most advice is generic - keep a 6-month EF in cash - but that really isn't necessary for everyone. When you are starting out, absolutely. Once you have a good size diverse portfolio, it becomes less important.

[thekid]

We have decent amounts invested, yet keep significant out of retirement savings in ING accounts/CDs. It's not simply a question of having money if needed, it's a question of not having to sell in a downturn if you need the money. For that reason, we don't invest anything that we may need in under 10 years (preferably longer).

From these "cash reserves" (usually around $100k) we pay cars cash (and then resave the amount to purchase the next ones), would pay any major repairs that may be needed for the house (and then resave the amount), have some capital for some business opportunities that can come along, etc. It's not really an "emmergency fund", it's more cash reserves+capex amounts. Basic idea is that we keep out of the market anything that's not (or may not be) a long term investment.