What do YOU consider the ideal emergency fund?

[JoeP]

Ours is cash and a bond fund that is accessible within a couple days. So quick access is one requirement for us.

The other is simply the amount. For us, we want to have enough to pay for 6 months worth of expenses, and also cover critical expenses not covered or not worthy of an insurance claim. Or things that might prove very expensive if not addressed immediately. This includes: certain car repairs, vet visit, certain appliance or household repairs I cannot fix myself, etc.

[MonkeyMama]

Or things that might prove very expensive if not addressed immediately. This includes: certain car repairs, vet visit, certain appliance or household repairs I cannot fix myself, etc.

Great point. I think this is a pretty huge reason why we find value in a large cash savings fund. No putting off repairs and "making things worse."

[ESMonitor]

My vote gets $20,000 and not a penny more.

That will cover some monthly expenses for most folks and help out with anything over an above such as unexpected medical expenses not covered by your insurance, legal fees, etc. The best thing that can happen is that you never have to spend a penny of it either. Think abaout that one.

[Permanent Temp]

I have a second job and have been putting all my checks from there into it. Since that second job pays almost nothing an hour and I had a wedding to pay for in the middle of the year I got just shy of 3K before I had a medical issue which whipped out almost all of that.

Now I need to build it back before this temp job runs out which makes me worried. Next time I'm going to make sure there is 5K in there.

My emergency fund is a true emergency fund though. I have another savings account with 2 months of expenses in there and those expenses are just factoring bills and nothing else. I'm close to hitting the 3 month mark in both of these.

I would be much happier with a 10K Emergency Fund, being able to afford health insurance and 7-8 months of expenses but we all had to start somewhere.

[sblatner]

We have a six month emergency fund that covers most expenses. I think I assume we would cut back on certain things if we found it necessary to use our emergency fund so it probably doesn't cover everything.

[Reggie]

I need $25k to feel comfortable. I could work part time with that and be fine for quite some time, probably 18 months.

[QuarterMillionMan]

I have approx $120,000 in my emergency funds and it is parked mostly in savings/checking accounts. This amount equals about 2 years of income for me. I know people will say that stockpiling this amount of cash in a savings/checking account earning .05% interest is foolish but after losing about $25,000 investing recently, I'm kind of scared to lose any more money and just having my money sit on the side for the time-being. I'm open to recommendations of any safer investment opportunities.


Edit to add: My Roth IRA is max'd at $5500 for 2013 and my 457 is on par to be max'd out at $17,500 for 2013 (my contribution rate is set at 25% each paycheck, my annual income is over $60,000). School, car, and credit cards are paid off. The only debt I'm carrying is a $38,000 mortgage at 7.5%. Should I paying off the mortgage which in essence would be like a 7.5% gain. The only problem is that I am seriously looking at purchasing another property and I don't want to wipe out my EF.

[JoeP]

The only debt I'm carrying is a $38,000 mortgage at 7.5%. Should I paying off the mortgage which in essence would be like a 7.5% gain. The only problem is that I am seriously looking at purchasing another property and I don't want to wipe out my EF.

You have a pretty high mortgage rate. If it were me, I'd pay off the mortgage yesterday and then point that freed up money back into my EF.

[disneysteve]

I have approx $120,000 in my emergency funds

The only debt I'm carrying is a $38,000 mortgage at 7.5%.

I would write a check today and pay off the mortgage. That still leaves you $82,000 which is pretty substantial and you can quickly rebuild it with the money that was going to your mortgage payment.

[TBH]

Agreed. Pay off the mortgage. Then start saving a down payment for another property. If you had to, you could live on even less if you had no mortgage payments.

Sounds like you're in a great position!

[GrimJack]

The problem with this plan is the assumption that there will be gains.

Let's say you have $10K in a Roth, invested in equities. A bear market occurs, and the value decreases 30%. You no longer have $10K to access in an emergency.

For this reason, an EF should not be invested in an asset that can lose value.

This assumes that you are investing with that account - you could keep it in a MM account as cash. Granted the tax on 1% of your EF won't be much but it won't cost anything.

[QuarterMillionMan]

Thanks for all the advice. I'm planning to pay off the mortgage. I'm waiting for my next automatic payment to process then I will write a $36,000 check. This is the biggest check I will have ever written and it is stressfull but I know it will be worth it when done. This is a big deal to me and a major milestone.



Edit: sorry but I didn't mean to hi-jack this thread.

[KTP]

I am kind of with QuarterMillionMan. Our EF is excessive and I am considering using some of it to pay off our mortgage (12 year 3.5% loan). I just can't quite bring myself to give up 3.5% money even though that is a far better rate than any EF could achieve. With few other deductions, I think we are within $1000 of the standard deduction even with the mortgage deduction.

[kork13]

I am kind of with QuarterMillionMan. Our EF is excessive and I am considering using some of it to pay off our mortgage (12 year 3.5% loan). I just can't quite bring myself to give up 3.5% money even though that is a far better rate than any EF could achieve. With few other deductions, I think we are within $1000 of the standard deduction even with the mortgage deduction.

If you're so close to the standard deduction (where your mortgage interest doesn't even matter anyway), I don't see the benefit to keeping your mortgage for the benefit of the low interest rate combined with the tax deduction... Or perhaps I misunderstood your post?

I dunno, personally, if/when my mortgage (and/or car loan) get to the point that I can write a check and pay it off, I would be VERY strongly tempted to do so on the spot, especially if that cash would come off the top of my reserves & leave my 6-month EF untouched.

[KTP]

If you're so close to the standard deduction (where your mortgage interest doesn't even matter anyway), I don't see the benefit to keeping your mortgage for the benefit of the low interest rate combined with the tax deduction... Or perhaps I misunderstood your post?

I dunno, personally, if/when my mortgage (and/or car loan) get to the point that I can write a check and pay it off, I would be VERY strongly tempted to do so on the spot, especially If that cash would come off the top of my reserves & leave my 6-month EF untouched.

It is the liquidity of having the 3.5% money available. Interest rates have already risen to the point where I could not get a 3.5% loan. If they rise a bit more, I can actually put the money to work at a higher rate than my loan and be net positive. I would also like to be able to buy a big dip in the market although it is looking less and less probable that will happen.

If we get through October with no market drop, I will pay off half of the remaining balance. If we get a large enough correction I will be going heavy into the market with that money.