Too much cash in EF?

[StepRightUp]

A lot of wisdom here. Especially the idea above that more cash on hand can make for more risk-tolerance. Now that I've reached my 1 yr EF goal, and have been maxing my retirement savings, I'm just considering - considering - investing a small amount in individual stocks. That's something I wouldn't entertain six months ago.

[LivingAlmostLarge]

A lot of wisdom here. Especially the idea above that more cash on hand can make for more risk-tolerance. Now that I've reached my 1 yr EF goal, and have been maxing my retirement savings, I'm just considering - considering - investing a small amount in individual stocks. That's something I wouldn't entertain six months ago.

You can do anything you want. You can pay off your mortgage, invest in after taxes into 401k if offered or do a Roth 401k. There are a lot of things to look at and everyone's situation is personal. We used the after tax 401k and we did a roth IRA and pretax 401k. Our bracket was high that taking every tax advantage was worth it.

I also could have put more into a 529 for the kids but I decided against it because I wanted flexibility in covering college. Something all these articles implied "oh you need to be saving $500/month into a 529." I'm like people don't save for retirement can save for college? Seems counterintuitive.

[kork13]

I also could have put more into a 529 for the kids but I decided against it because I wanted flexibility in covering college. Something all these articles implied "oh you need to be saving $500/month into a 529." I'm like people don't save for retirement can save for college? Seems counterintuitive.

Yeah, I don't know why people make college savings so hard. If you start it early, it's really very easy to have plenty for their eventual schooling.

For each of our boys, we've just added $100/mo plus $10/mo per year of age (so our 3 y/o gets $130/mo, 5 y/o gets $150/mo, and once we have a SSN for her, our newborn will get $100/mo). It builds up slowly over time, but it'll cover college no problem.

In fact, I was looking at the numbers recently, and we may actually be way over-funding their 529s. Our 5 y/o already has $26k in his 529, with another 12+ years to go. For now we'll plan to level off at $200/mo from age 10 on, but I expect we'll eventually just stop contributing to it completely.

The point is, though, as LAL also mentioned, that once you figure out a comfortable level of cash & get it in place, you're free to send your money elsewhere. Exactly where will be driven by your financial priorities, but retirement, home, college, taxable investing, etc. are all very good options.

[LivingAlmostLarge]

Yeah, I don't know why people make college savings so hard. If you start it early, it's really very easy to have plenty for their eventual schooling.

For each of our boys, we've just added $100/mo plus $10/mo per year of age (so our 3 y/o gets $130/mo, 5 y/o gets $150/mo, and once we have a SSN for her, our newborn will get $100/mo). It builds up slowly over time, but it'll cover college no problem.

In fact, I was looking at the numbers recently, and we may actually be way over-funding their 529s. Our 5 y/o already has $26k in his 529, with another 12+ years to go. For now we'll plan to level off at $200/mo from age 10 on, but I expect we'll eventually just stop contributing to it completely.

The point is, though, as LAL also mentioned, that once you figure out a comfortable level of cash & get it in place, you're free to send your money elsewhere. Exactly where will be driven by your financial priorities, but retirement, home, college, taxable investing, etc. are all very good options.

Kork how did you save $26k in a 529 in 5 years. That only makes $1200 +$1320+$1440+$1560+1680+1800 = $9000. Those are pretty incredible gains in 5 years. It's close to 40% gains annually compounded.

My DK1 is 11 and has $44k in ESA at $2k/year but its a longer time frame of 11 years. And DK2 has $34k but is 8. My contributions have been 1x a year in january into a VTI and now VOO

[kork13]

Kork how did you save $26k in a 529 in 5 years. That only makes $1200 +$1320+$1440+$1560+1680+1800 = $9000. Those are pretty incredible gains in 5 years. It's close to 40% gains annually compounded.

My DK1 is 11 and has $44k in ESA at $2k/year but its a longer time frame of 11 years. And DK2 has $34k but is 8. My contributions have been 1x a year in january into a VTI and now VOO

Kick-started with $3k (Vanguard's MF minimum). Looks like I've added their AK PFD checks to it (once annual $600-$1200) three times. Apparently also sent $200/mo for the first 14 months (not sure why). Otherwise, I can't really say... It's invested relatively aggressive, but Vanguard says it's only been 12.4% ROI, cost basis $17,200, since summer 2015. Our 3 y/o's 529 is $16k current, $11k basis, 13.9% returns since summer 2017. I really don't pay much attention to those accounts -- they're growing, which for now is all I need them to do.

[LivingAlmostLarge]

Kick-started with $3k (Vanguard's MF minimum). Looks like I've added their AK PFD checks to it (once annual $600-$1200) three times. Apparently also sent $200/mo for the first 14 months (not sure why). Otherwise, I can't really say... It's invested relatively aggressive, but Vanguard says it's only been 12.4% ROI, cost basis $17,200, since summer 2015. Our 3 y/o's 529 is $16k current, $11k basis, 13.9% returns since summer 2017. I really don't pay much attention to those accounts -- they're growing, which for now is all I need them to do.

Ah okay that makes more sense. I am very aggressively invested having left everything in VTI or VOO more recently and no bonds. Even the 11 year old I figure we have another 11 years. I think I'll look at around 18 moving to something more conservative. But since we have balanced it out so it's half ESA/529 and half taxable and I'm adding only $2k a year to ESA and I don't think we can do taxable for a couple of years I think we are fine.

Also if this doesn't cover 100% the college costs for my 11 or 8 year old I think we should be able to cash flow it at that time. Of course that time is coming sooner than I think.

[MariaMur]

Saving some money is a great idea, but you need to be careful. I also wanted to invest a part of my business' profit in shares of another company. I even prepared cash to put it in my bank account. While counting it, I noticed that some cash is missing. Like someone opened my safe and took some money. I brought everything I had to the bank, and they verified the cash amount. I was right -- 1K was missing. After that, I've always monitored the cash amount I keep. I've even bought a money counter to be able to find out if something is missing or not whenever I want.

[cypher1]

I'm sitting on about 35K in cash, with 65K in taxable. Cash broken down is about 12 mo EF of 24K, 6K for next year Roth, and the rest for tuition or vacation fund. I'm not looking for a different car for at least 2 years, and the extra cash is more for home repairs/maintenance.

While my job is relatively stable (knock on wood), does it make sense to start dumping more cash into taxable and stick with a 6-9mo EF?

The 12mo EF is more of peace of mind, but I'm starting to think if I really needed cash for something down the road, I could pull from taxables. Since the pandemic started last year have others upped their EF as well? Thoughts?

There is no real follow-up question, but just revisiting this post from over four years ago and a great refresher for comments/discussion on the debate of keeping more cash in EF. Compared to back then, I keep about 25K in cash, 40K ibonds, 110K taxable, 46K HSA. Of that cash about 15K will probably go to a car in the near future.

[LivingAlmostLarge]

So I've stashed I think $100k in ibonds. I've been building my ladder. I don't know why other than it's something to do with excess cash. I hold mostly cash and no bonds in our portfolio. Everything is pretty much invested as steve said earlier. we've got less than 5% in cash/bonds equivalents.

$90k in vanguard MM
$50k in capital one
$100k in ibonds
$100k schwab MM

that's it. Rest is invested.

My kids ESA Coverdell accounts which are $2k/year or less than $200/month are now at $75k and $60k for a 15 and soon to be 13 year old. Basis is $30k and $26k respectively. Now that will not pay for college for 4 years at a public university but if I were looking to cover some, cash flow some, kid works, and small loans, I think it's more than enough to cover 4 years at a state school. I mean it's personally a really good amount towards it and we have 3 -7 years for the oldest and 5-9 years for the younger one.

I would comfortably say saving $166./month is not an outrageous amount for most people for college. To have quite a bit set aside. We did this ourselves because our families never gifted us money. My mom has given all grandchildren $50 on birthday and $50 at christmas. So total $100/year. My parents felt that was very generous. And my in-laws gave us nothing. So when I read people writing "save all the money your families gifts your kids for college," I think huh so I save $100/year from my parents? Then who else gives my kids money? No one.