68
votes
Accepted
What emergencies could justify a highly liquid emergency fund?
I suppose this could really depend on the part of the world you're in, but there are still many instances of "emergencies" that need "cash". You have to decide how much cash is the right amount, but I ...
- 3,641
67
votes
Why do I need an emergency fund if I already have investments?
Emergency funds have a very specific and obvious benefit; you'll have money sitting around in case you need it. A lot of people think a big car repair or some unexpected home repair is an emergency, ...
- 49k
47
votes
Accepted
Should Emergency Funds be Used for Infrequent, but Likely, Expenses?
Which of these categories are emergency funds meant to cover?
Emergency funds are for emergencies, which to me means expenses that are unanticipated and can't be covered out of "normal" cash-flow. ...
- 131k
45
votes
Accepted
Pay off Loan With Savings or Keep Emergency Fund
What nobody else mentioned yet is what you could do from now on. If you consider your current savings enough of an emergency fund, you can look into regularly overpaying your loan from now on.
How ...
- 505
42
votes
Should we keep some of our emergency fund in cash at home?
I would not allow fear to be a driving motivation.
However, we do keep some cash and it comes in handy. Normally about 1K is found in our safe, and we use it for cash needs and avoiding running to ...
- 76.1k
40
votes
What emergencies could justify a highly liquid emergency fund?
You are not wrong - just about anything can be charged and paid off in 30 days with a sale of non-liquid investments. So there are not any emergencies I can think of that require completely liquid ...
- 131k
35
votes
What emergencies could justify a highly liquid emergency fund?
Weather events and aging infrastructure. Cash will buy gasoline, food and water when there is no power or telephone connectivity to process ATMs and credit cards.
Hurricane Katrina
Superstorm Sandy ...
- 8,348
35
votes
Pay off Loan With Savings or Keep Emergency Fund
It sounds like you have some very real income risk, so I would not drain my savings completely just to get rid of the loan. I don't know how long £5000 would last you if you lost your job, or how long ...
- 131k
29
votes
How much money should I lock up in my savings account?
Firstly well done on building a really sold base of savings.
An emergency fund needs to have two key characteristics:
Be enough to get you through a typical emergency event (often seen as approx. ~6 ...
- 5,768
28
votes
Why do I need an emergency fund if I already have investments?
My take on this is that this reduces your liquidity risk. Stocks, bonds and many other investment vehicles on secondary markets you may think of are highly liquid but they still require that markets ...
- 2,269
26
votes
What emergencies could justify a highly liquid emergency fund?
What sort of emergency requires payment up front for which 2-3 days processing of a stock sale would pose a problem? In my case, the sudden and unexpected death of my wife.
Back in 2011, my wife was ...
- 14.1k
26
votes
Strategy to pay off revolving debt while building reserve savings fund?
The bottom line is you are flirting with debt, much like I did during my younger years. Many ill-informed people will tell you to continue to march, build wealth by using other people's money. ...
- 76.1k
20
votes
Accepted
Is it a right decision to pull money from emergency fund to buy a liability but need?
The purpose of the emergency fund is to enable you to pay for unplanned necessary expenses without going into debt.
You know that cars don't last forever and eventually need to be replaced. Ideally, ...
- 115k
20
votes
Accepted
Should I prioritize my 401(k) over my student loans?
Purely financially, giving up the employer match is hard to argue. It's mathematically a free 100% return, but you can't get to it for many years. So it's a great benefit for the future.
On the ...
- 131k
18
votes
Should we keep some of our emergency fund in cash at home?
It's hard to decide what level of catastrophe you want to be prepared for and people will have varying opinions on the topic. Some people keep gold/silver at home thinking that cash won't be valuable ...
- 69.1k
18
votes
In the US, what is a good way to get emergency money for a couple of weeks?
Retirement funds would the the last place to look for "emergency" cash due to the heavy taxes and penalties involved. Loans from friends and family would be the next-to-last, unless you can ...
- 131k
17
votes
Why do I need an emergency fund if I already have investments?
There are a few major risks to doing something like that.
First, you should never invest money you can't afford to lose. An emergency fund is money you can't afford to lose - by definition, you may ...
16
votes
Accepted
How much (paper) cash should I keep on hand for an emergency?
Coming from an area that is hurricane prone, and seeing what happens to local businesses during evacuations/power outages/gas shortages, I think what you already have on hand should be sufficient. And ...
- 13.8k
16
votes
Should Emergency Funds be Used for Infrequent, but Likely, Expenses?
The concept of emergency fund is a matter of opinion. I can tell you the consensus is that one should have 6-9 months worth of expenses kept as liquid cash. This is meant to cover literally all bills ...
16
votes
What emergencies could justify a highly liquid emergency fund?
I tend to agree that the need for liquidity is overplayed in this day and age. We live in a world of electronic transfers that take only a couple days at most. With my brokerage account I can go ...
- 49k
15
votes
What emergencies could justify a highly liquid emergency fund?
If you engage in any kind of dangerous activity, the training courses will often state that an accident is not the result of a simple error. Examples of this include SCUBA and motorcycle training. ...
- 76.1k
14
votes
Strategy to pay off revolving debt while building reserve savings fund?
I think that your intuition about the tough pill is correct, and that you should pay off those two credit cards today. Yes, paying them off will reduce your emergency fund for the moment, and that ...
- 241
12
votes
What emergencies could justify a highly liquid emergency fund?
Having a highly liquid emergency fund can lubricate the wheels for disaster recovery.
For example, several years ago I returned from a vacation to discover that, during my absence, a plumbing ...
- 872
12
votes
Clear (agreed) overdraft or start emergency fund first?
The notion of an emergency fund before other debt-elimination measures is predicated on having made a budget that allows for saving money each month. Being overdrawn suggests that hasn't happened yet.
...
- 69.1k
12
votes
Should we keep some of our emergency fund in cash at home?
Yes, but not too much again, for slightly different reasons.
Here in the UK we've seen cases of IT failures taking out card processing systems for hours or even days. In those cases cash still works, ...
- 2,505
11
votes
Is it a right decision to pull money from emergency fund to buy a liability but need?
The first thing that strikes me is: Is this a time-limited offer? Because if you can expect the offer to still be valid in a few weeks, why not just wait that month (which will earn you the money) and ...
- 4,599
11
votes
Should Emergency Funds be Used for Infrequent, but Likely, Expenses?
For me, the emergency fund is meant to cover unexpected, but necessary expenses that I didn't budget for. The emergency fund allows me to pay for these things without going into debt.
Let's say that ...
- 115k
11
votes
What emergencies could justify a highly liquid emergency fund?
Emergency funds are defined in terms of months of tightened-belt living -- that's according to the usual gurus such as Suze Orman, Dave Ramsey etc.
They aren't for short-term emergencies like a ...
9
votes
How much money should I lock up in my savings account?
One issue which I don't see addressed in the answers so far is how to structure bank accounts to get the highest return possible. What you're describing sounds like a certificate of deposit (CD):
'...
- 4,452
9
votes
Pay off Loan With Savings or Keep Emergency Fund
"Emergency funds aren't important", eh? Let's try that on for size.
Emergency funds were all the rage during the 2008-09 recession. Suze Orman, for instance, wouldn't shut up about them. ...
Only top scored, non community-wiki answers of a minimum length are eligible