How should I prioritize my savings between enlarging my emergency fund, saving for retirement, and saving up for a down payment on a house (financial aspects of buying vs renting aside, I would prefer to own my home)?


  • I have no debt besides my credit cards (which I pay in full every month) and a car lease.
  • I already have an small emergency fund of approximately 2 months of expenses.
  • I am married with 2 small children
  • Neither my spouse nor I have access to a 401K plan right now, but this may change in the future


It has been suggested that this question is either a duplicate of Best way to start investing, for a young person just starting their career? or Oversimplify it for me: the correct order of investing. I looked at the answers to these questions, but they don't really help:

  1. Most of the answers to the first question deal with investing strategies in and not prioritization of savings goals.
  2. Even the answers to the second question don't seem to mention saving for a down payment at all (unless you assume that saving for a down payment is a perfect equivalent of paying of a mortgage early.
  3. Most answers I find about saving priorities on this site, or on the web in general place one of the highest priorities on "401K contributions up to your match", but don't explicitly give alternative priorities for when a 401K isn't available.
  • I recommend reading that question, or many others on this site that are linked from there, which talk about fundementals of how to decide what amounts to invest with various goals in mind. If you have a more specific question not covered there, you should ask it with reference to what you already know. There is not much that can be said from what little details you've provided, that wouldn't be better answered by one of the great answers already provided to early 'investing basics' questions. Jun 21, 2017 at 21:23
  • In the order you listed them, and build the emergency fund to the point that it will cover ~6 months of expenses after you buy, ie bulk it up for planned expense increases ahead of time rather then in reaction to changes.
    – Hart CO
    Jun 21, 2017 at 21:23
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    @Grade'Eh'Bacon - agree. OP is asking us to tell him what's most important to him and his family. Some would say save a minimum emergency fund in order get out of the lease, but a larger emergency fund with a family might be more important.
    – D Stanley
    Jun 21, 2017 at 21:29
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    Whatever you do please consider getting rid of the lease. It's the most expensive way to use a car. You're effectively renting it since it almost never makes any sense to buy the car after the lease is up. Leases are usually used to rent a car you can't afford to buy.
    – D Stanley
    Jun 21, 2017 at 21:30
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    Assuming you are eligible, I personally recommend putting your emergency funds into a Roth IRA (unless you are already maxing out your IRA contribution), Put the funds in a non-volatile account and choose an IRA custodian that will allow you to quickly take withdrawals (of your contributions) in case of an emergency. If you end up not ever needing the funds you can later invest it. It's a little extra work if you end up pulling the money back out but it's a tremendous win if you don't have an emergency. More info: money.stackexchange.com/q/80704/17718
    – TTT
    Jun 21, 2017 at 21:58


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