When do you need a emergency fund?

[james.hendrickson]

I was talking about this with my mom last night. She has a ton of stocks and bonds set up for her retirement as well as a healthy amount of cash. She also doesn't have an account thats a specific "emergency fund". He reasoning is that her cash situation is very healthy and she has enough in stocks to cover any emergency that could come up.

Do here is my question to you guys: obviously if you are a multi-millionaire you don't need an emergency fund, but when else would you not need one?

[disneysteve]

a healthy amount of cash. She also doesn't have an account thats a specific "emergency fund".

So that cash is her EF whether she calls it that or not.

I'm not exactly sure what your question is.

I don't have a designated account either but I have more than enough liquid assets to cover emergencies.

[james.hendrickson]

Disneysteve,

The question is: when do you NOT need a specific "emergency fund"?

[GoodSteward]

Well, I guess the first question is what is an EF? I define it as a liquid cash account that helps you avoid debt and is easily accessible. It’s there to cover unexpected (IE unbudgeted) expenses that will result in rolling debt otherwise such as car repairs, or at the worse job loss. The EF is a buffer to avoid debt.

I don’t think it matters if they have a fund labeled emergency as long as they have money on tap that it ok to pull from. You wouldn’t want someone pulling from retirement over and over. The EF label is more mental than anything because it typically signifies the money is for emergencies only, so you leave it alone. As long as they have money to do this I don’t think it matters if you have an official fund called an EF or not. The biggest thing is to make sure that fund isn’t going down, but either maintaining or building to cover the intended emergency.

That’s my 2 pennies worth.

[tripods68]

I'm with Steve here...

How this is even a question. If you a multi-millionaire, your mom cash is her reserve, emergency fund, or vacation fund all in one (entire estate). Your mom don't need emergency unless she earmark specific amount for such 'thing' with that money.

[james.hendrickson]

I'm with Steve here...

How this is even a question. If you a multi-millionaire, your mom cash is her reserve, emergency fund, or vacation fund all in one (entire estate). Your mom don't need emergency unless she earmark specific amount for such 'thing' with that money.

Tripods, gurus like Dave Ramsey will argue all day long that you need an "emergency fund", other than having a lot of cash on hand, are there other situations when you don't need one?

[Jluke]

when you are one of the advanced SA members who has a collective pool of money in various accounts and levels of accessibility (liquid, illiquid) that you don't need to think in buckets of money with specific purpose.

If I had an emergency, I'd probably put it on my credit card and then pull the "cash" from the appropriate account(s) to pay it in full.

quick list of EF coverage
- designated EF
- credit card (for points of course and paid in full when due)
- cash
- taxable investment
- personal loan
- roth contribution

[tripods68]

Tripods, gurus like Dave Ramsey will argue all day long that you need an "emergency fund", other than having a lot of cash on hand, are there other situations when you don't need one?

Nothing come to mind.


Your mom has plenty of cash with probably zero debt (correct me if I'm wrong). So what's to worry? Nothing.

[disneysteve]

Everybody, even billionaires, need to have access to liquid funds to pay unexpected expenses. That's what an emergency fund is no matter what you call it.

When don't you need an EF (which is not the title of the thread by the way)? When you're dead.

[greenskeeper]

Everybody, even billionaires, need to have access to liquid funds to pay unexpected expenses. That's what an emergency fund is no matter what you call it.

In the business world most companies calculate cash on hand to cover operating costs should income go to zero. I would think the same could apply to households as well.

My employer holds 16 months of operating cash if all income went to zero....think hundreds of millions.

[Eagle]

You may not need a significant emergency fund if your income is so ridiculously disproportionate to your expenses you can cash flow pretty much anything.

For example you make $100,000 a month and spend an average monthly of $10,000.

In other words you can have great offense (income) and not need to play much defense (budgeting, frugal living, etc.)

Most people, however, have an emergency fund who are winning with money even if they don't call it that per say. Just my 2 cents.

[kork13]

Tripods, gurus like Dave Ramsey will argue all day long that you need an "emergency fund", other than having a lot of cash on hand, are there other situations when you don't need one?

A dead man has no need of an emergency fund. (though a good estate plan would be desirable)

In just about all other cases, I would say that EVERYONE needs some form of an emergency fund. As already stated, an EF can be liquidity held in savings, CDs, bonds, or cash held in a box buried next to the shed. It doesn't even need to be specified as an "emergency fund". Money is fungible, which people forget all the time. But everyone needs liquidity. Never in my life would I ever consider not having some liquid funds available to me for an unanticipated expense or loss of income.

[Outdoorsygal]

69 people currently reading this thread but it's the same few who are posting. I wonder how come they don't join

[FLA]

when you are one of the advanced SA members who has a collective pool of money in various accounts and levels of accessibility (liquid, illiquid) that you don't need to think in buckets of money with specific purpose.

If I had an emergency, I'd probably put it on my credit card and then pull the "cash" from the appropriate account(s) to pay it in full.

quick list of EF coverage
- designated EF
- credit card (for points of course and paid in full when due)
- cash
- taxable investment
- personal loan
- roth contribution

When I was working, I was so focused on retirement savings that I did not keep much in savings at all. I figured if a dire situation arose I always had a 0% interest credit card going, and Roth contributions that had been there 5 yrs or more.

[disneysteve]

Roth contributions

Since Roth contributions can be withdrawn at any time for any reason without penalty, some people do consider that their EF. I think it was Suze Orman who would sometimes recommend this method. I think as long as you have sufficient retirement savings elsewhere (like a 401k), this is okay, but I prefer to consider retirement accounts to be off limits for anything but retirement and life-threatening emergencies after other monies have been exhausted.