1,000$ emergency fund relevant anymore?

[GoodSteward]

This is somewhat a Dave Ramsey topic.

Do you think 1,000$ is enough for an efund anymore to people who are just starting out trying to fix things, at least for the avg household?

I can understand some people will struggle to get even that, and that is what he bases this off of. He says most families can pull that much together in just a few months or less. However, how much of a buffer is that really anymore? A real emergency can easily go over 1,000$, especially if you're talking A/C problems or Car repairs.

Here is my beef with this thought process. You just told Mr. and Mrs. NeedHelp that they need to cut up all their cards, then save 1k, and run for it! The problem is what are they supposed to do when their AC blower needs replacing at 2k$? Or the transmission just fell out and needs a 1,500$ rebuild? They don't have the cash on hand, and they don't have a credit card to fall back on. They are up a creek. I know this apparently doesn't happen all that often, or he would get more backlash and raise it (I assume). However, with the price of just being alive going up, I don't see how 1k$ will cut the mustard anymore for most people, especially if you are really trying to avoid 90% of the most common possible financial hardships via a starter efund.

My personal thought on this is 2-3k$ minimum.

[disneysteve]

I agree with you, but I also agree with Dave.

He is speaking to people who have less than nothing. $1,000 probably represents the most savings they will have ever had at once. That's a HUGE accomplishment to them.

Is it enough? No, probably not. One car repair and it's gone. One major home repair and it's gone. One trip to the ER and it's gone. But even in those cases, the people are still $1,000 better off than they would have been previously.

I suspect that deep down, when the microphone is off, Dave would acknowledge that $1,000 isn't really enough, even for a starter EF, but he probably just doesn't want to change that number since he's been preaching it for so long, it's in all of his books, it's ingrained in his teachings.

[creditcardfree]

I understand what you are saying. I agree it is a little low, however it's a starting place if you have had nothing saved ever! That is a huge win for someone to save that much up if they haven't in the past.

I also think DR wants people to be super resourceful before caving to a credit card in an emergency. Transmission blown he probably would suggest ride the bus or your bike, maybe borrow rides or a car from a friend until you can get the other $500 saved. AC? That's an emergency? It might feel like it but it's not when you are in debt and drowning because of it.

Now while he's extreme and I understand it, I personally wouldn't harp on someone if they could save $2-3K FAST and then start debt pay down.

[disneysteve]

I also think DR wants people to be super resourceful before caving to a credit card in an emergency.

That's a good point. I've said many times that very little of what people call an emergency is truly an emergency.

[Nutria]

I suspect that deep down, when the microphone is off, Dave would acknowledge that $1,000 isn't really enough, even for a starter EF, but he probably just doesn't want to change that number since he's been preaching it for so long, it's in all of his books, it's ingrained in his teachings.

Two points:

1. setting the EF to -- for example -- $3K would seem an impossible goal when you're drowning, and
2. baby step 3 (accum 3-6 months of expense money) implicitly acknowledges the insufficiency.

[snafu]

As I see it, the basic message is 'everyone needs an emergency fund.' A month ago the media's lead story was... 'a study revealed, the majority of households would be unable to come up with $ 400. to cope with an emergency.'

https://www.washingtonpost.com/news/wonk/wp/2016/05/25/the-shocking-number-of-americans-who-cant-cover-a-400-expense/

Bless DR, SA or anyone who can convince people to create an emergency fund of $ 1,000. If they can be convinced to save an entire month's expenses, it would be fantastic!

May 3rd, an entire community in our province was required to evacuate due to forest fires and suddenly, there was an unanticipated emergency and a huge percentage of people were in financial crisis.

[GoodSteward]

This is all true, and if you have nothing than even 500$ built up that isn't already obligated is a big deal. I was just thinking from the other side when it isn't enough, but they burned their bridges to other help and haven't made it to baby step 3 yet. I suppose those are rare cases, and shouldn't shift the norm. My boss is always talking to me about how more than half of America can't come up with 1000$ cash today, meaning they don't have cash saved and could only get it by borrowing.

Thanks for the input guys!

[creditcardfree]

I've told both of our daughter's they need to have $500 minimum when they start college as an emergency fund.

I haven't been so great at writing about it on my blog lately, but I'm all for finding small amounts of money to encourage others that those funds do add up. They can be used to build an EF, pay off debt or both!

[rennigade]

Looks like sv2007 changed their screen name to goodsteward. Either that or someone cloned them.

[Eagle]

A $1000 emergency fund is a good start. We probably kept closer to $2000-3000 when we were trying to pay off our debt. It's a big deal to a lot of people to have this kind of money in the bank. Particularly those who are just used to spending whatever they have in the bank come payday.

Lol so is GoodSteward the same as SV2007?

[Nutria]

Looks like sv2007 changed their screen name to goodsteward. Either that or someone cloned them.

How so? (sv2007's last post was 17-June and GS's FP was 16-June, so it's certainly possible that he opened a new account. Maybe he got dinged by the Admins one too many times?)

[GoodSteward]

Would this be a good thing? Lol

I am new to this site. I used to roam around Getrichslowly.com, but they didn't seem as open as you guys are.

I have been seeing that other guy around still I thought? Anyway, if it helps you out I'm 31, live in GA, work in IT and pastor a small church. I have been married 11 years, have 3 kids and one on the way. Not sure how this other guy compares, but eh.

[LivingAlmostLarge]

$1k usually covers most crazy expenses that come up during debt repayment.

[parafly]

I agree that $1000 is an inadequate emergency fund when paired with the advice to cut up all your credit cards. If a major appliance goes out or a car breaks down, the person is left in a very tough, low-options position.

[Nutria]

Would this be a good thing?

I will neither confirm nor deny whether it's a good thing.