Where To Put My Emergency Fund?

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rattlenap
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Where To Put My Emergency Fund?

Post by rattlenap » Wed Aug 09, 2017 8:05 pm

I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?

mhalley
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Re: Where To Put My Emergency Fund?

Post by mhalley » Wed Aug 09, 2017 8:55 pm

That is perfectly reasonable. The wiki says you could keep the first 3 mos in mm, the next 3 mos in cds and if you desire more than six mos, the next 3 mos in a short term treasury bond fund.

https://www.bogleheads.org/wiki/Emergency_fund

DoctorPhysics
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Re: Where To Put My Emergency Fund?

Post by DoctorPhysics » Wed Aug 09, 2017 9:31 pm

Not for everyone but I try to run a lean EF.

3 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni

aristotelian
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Re: Where To Put My Emergency Fund?

Post by aristotelian » Wed Aug 09, 2017 9:39 pm

DoctorPhysics wrote:Not for everyone but I try to run a lean EF.

3 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
+1, except I substitute I-Bonds for CD's.

nura
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Re: Where To Put My Emergency Fund?

Post by nura » Wed Aug 09, 2017 9:42 pm

3 months cash, rest VTINX

aramv
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Re: Where To Put My Emergency Fund?

Post by aramv » Wed Aug 09, 2017 9:56 pm

Rarely does one need emergency 10k right away.

I have 2 months of expenses in my checking and
6 months expenses (10k) in Betterment (60/40)

Depends on your personal life situation

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Wed Aug 09, 2017 10:04 pm

Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Nicolas
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Re: Where To Put My Emergency Fund?

Post by Nicolas » Thu Aug 10, 2017 9:08 am

willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
On the turntable: Cat Stevens: Moonshadow

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flamesabers
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Re: Where To Put My Emergency Fund?

Post by flamesabers » Thu Aug 10, 2017 9:14 am

OP,

I think it's fine to keep your emergency fund in one of Vanguard's money market funds.

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Thu Aug 10, 2017 9:46 am

Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Nicolas
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Re: Where To Put My Emergency Fund?

Post by Nicolas » Thu Aug 10, 2017 9:58 am

willthrill81 wrote:
Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
Hmm, you have a point about extended power outages. The longest power outage of my life was only four hours. We have no exposure to hurricanes. If I was ever to face one of long duration I'd probably just hunker down and eat what's in our pantry. Since I no longer work, no need to drive anywhere. I'll take that risk over keeping a lot of cash around. My EF is mostly in high yield online savings, so in the event of a long-duration power or internet outage I'd be out of luck. So far, hasn't happened. But it could I suppose.
On the turntable: Cat Stevens: Moonshadow

lostdog
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Re: Where To Put My Emergency Fund?

Post by lostdog » Thu Aug 10, 2017 10:00 am

You could go with Vanguard Short-Term Bond Index fund.
"Our life is frittered away by detail. Simplify, simplify." -Thoreau | Vanguard Total World Index

Chadnudj
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Re: Where To Put My Emergency Fund?

Post by Chadnudj » Thu Aug 10, 2017 10:01 am

willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.

I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Thu Aug 10, 2017 10:09 am

Chadnudj wrote:
willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.
State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.

I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
Chadnudj wrote:I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.
If the cash is well hidden in a fire resistant box, the likelihood of it being stolen is remote. And just for that possibility, we have a small decoy firebox filled with rocks in our bedroom that would make a thief think he'd hit the jackpot and hit the road. :wink: Our 'real' firebox is very well hidden.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

ecotone
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Re: Where To Put My Emergency Fund?

Post by ecotone » Thu Aug 10, 2017 10:16 am

Chadnudj wrote:
willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.

I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.
Part of our "emergency fund" are food stuffs, water, first aid, batteries, etc. It's not sizable, and we don't consider ourselves paranoid, but it gives us added piece of mind. We hope to never use any of it.

Chadnudj
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Re: Where To Put My Emergency Fund?

Post by Chadnudj » Thu Aug 10, 2017 10:19 am

willthrill81 wrote: State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.

I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
I guess I just don't see losing power for 24 hours (or even 48 or 72) as an "emergency" where I'd need access to hard cash, so long as my home is outfitted with sufficient non-perishable food/potable water/batteries, etc. YMMV.

bob_m10
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Re: Where To Put My Emergency Fund?

Post by bob_m10 » Thu Aug 10, 2017 10:31 am

willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Does that mean Wellesley is sitting in a taxable account?

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Thu Aug 10, 2017 12:06 pm

bob_m10 wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Does that mean Wellesley is sitting in a taxable account?
No, it's in a Roth IRA that I had enough free space in for it a while back.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Thu Aug 10, 2017 12:16 pm

Chadnudj wrote:
willthrill81 wrote: State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.

I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
I guess I just don't see losing power for 24 hours (or even 48 or 72) as an "emergency" where I'd need access to hard cash, so long as my home is outfitted with sufficient non-perishable food/potable water/batteries, etc. YMMV.
It probably wouldn't be, but it might be as well. The problem with the future is that we don't know much about it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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welderwannabe
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Re: Where To Put My Emergency Fund?

Post by welderwannabe » Thu Aug 10, 2017 12:18 pm

rattlenap wrote:I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?
You would do better in a Ally savings account and it is insured. Even better is to start to move it to iBonds. They are earning 1.96% right now. You can move it a bit per year so you don't have your entire EF locked up. You can't cash out an iBond for 1 year.

rattlenap
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Re: Where To Put My Emergency Fund?

Post by rattlenap » Thu Aug 10, 2017 1:53 pm

lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
Yeah, that's a little to risky for my taste.

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DaftInvestor
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Re: Where To Put My Emergency Fund?

Post by DaftInvestor » Thu Aug 10, 2017 1:55 pm

Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)

rattlenap
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Re: Where To Put My Emergency Fund?

Post by rattlenap » Thu Aug 10, 2017 3:45 pm

DaftInvestor wrote:Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)
How many months do you keep in each Tier?

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DaftInvestor
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Re: Where To Put My Emergency Fund?

Post by DaftInvestor » Thu Aug 10, 2017 4:05 pm

rattlenap wrote:
DaftInvestor wrote:Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)
How many months do you keep in each Tier?
I keep about 6 months in tier 1 and now have about that in tier 2 (but I also count the ibonds as a portion of my bond retirement allocation).
How many months you want to hold really depends upon how secure you feel in your job and what your obligations are. As I've gotten older - it could take me quite a while to find another job at my income level.

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Fri Aug 11, 2017 9:38 am

rattlenap wrote:
lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
Yeah, that's a little to risky for my taste.
A short-term bond index fund is risky? :confused

The worst year in the history of this fund, it returned .07%, so it's never lost money over a year. There was one brief period inside a year where it lost 1.85%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mega317
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Re: Where To Put My Emergency Fund?

Post by mega317 » Fri Aug 11, 2017 11:36 am

rattlenap wrote:
lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
Yeah, that's a little to risky for my taste.
This really limits the possibilities. How about Vanguard ultra-short bond fund? SEC yield 1.5% so might as well go with CDs. Otherwise VMMXX, high-yield savings, I bonds. That's it.

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willthrill81
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Fri Aug 11, 2017 11:45 am

mega317 wrote:
rattlenap wrote:
lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
Yeah, that's a little to risky for my taste.
This really limits the possibilities. How about Vanguard ultra-short bond fund? SEC yield 1.5% so might as well go with CDs. Otherwise VMMXX, high-yield savings, I bonds. That's it.
Precisely. It sounds like anything less than an FDIC insured account is too risky for him. In that case, an online savings account with someone like Ally is probably about the best he can do as far as interest rates go since six month CD rates are below 1%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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flamesabers
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Re: Where To Put My Emergency Fund?

Post by flamesabers » Fri Aug 11, 2017 1:56 pm

willthrill81 wrote:Precisely. It sounds like anything less than an FDIC insured account is too risky for him. In that case, an online savings account with someone like Ally is probably about the best he can do as far as interest rates go since six month CD rates are below 1%.
The Navy Federal Credit Union has a CD offering a rate above 1%. They have a special of 3% for 5 months for a maximum amount of $10k:

viewtopic.php?t=225391

rattlenap
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Re: Where To Put My Emergency Fund?

Post by rattlenap » Fri Aug 11, 2017 3:01 pm

Sorry for the run around here. But I just found out today that my company offers a Credit Union with a 2% interest payment on deposits up to $25k. So I am now taking a look at this. Though I am not that familiar with Credit Unions. Are they FDIC insured, what should I look out for before putting money into one? Any advice will be great.

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welderwannabe
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Re: Where To Put My Emergency Fund?

Post by welderwannabe » Fri Aug 11, 2017 3:03 pm

Credit unions don't use FDIC. They use NCUA which is very similar.

The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.

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flamesabers
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Re: Where To Put My Emergency Fund?

Post by flamesabers » Fri Aug 11, 2017 3:07 pm

rattlenap wrote:Sorry for the run around here. But I just found out today that my company offers a Credit Union with a 2% interest payment on deposits up to $25k. So I am now taking a look at this. Though I am not that familiar with Credit Unions. Are they FDIC insured, what should I look out for before putting money into one? Any advice will be great.
Credit Unions are backed by the National Credit Union Administration. The Administration functions much like the FDIC, including offering insurance coverage on deposits up to $250k.

rattlenap
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Re: Where To Put My Emergency Fund?

Post by rattlenap » Fri Aug 11, 2017 3:08 pm

welderwannabe wrote:Credit unions don't use FDIC. They use NCUA which is very similar.

The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
So all Credits Unions are NCUA no matter what, correct? Are there also any pitfalls with using a Credit Union? It's not something I'd use a regular basis, but is only for my EF.

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flamesabers
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Re: Where To Put My Emergency Fund?

Post by flamesabers » Fri Aug 11, 2017 3:19 pm

rattlenap wrote:
welderwannabe wrote:Credit unions don't use FDIC. They use NCUA which is very similar.

The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
So all Credits Unions are NCUA no matter what, correct? Are there also any pitfalls with using a Credit Union? It's not something I'd use a regular basis, but is only for my EF.
The credit union must be insured by the NCUA. There will be signs inside their buildings and on their website to indicate they are insured by the NCUA. You can look up on NCUA's website to verify if a particular credit union is insured.

https://www.ncua.gov/Pages/default.aspx

One potential pitfall with credit unions is the requirements to join one. Since you're already eligible to join the credit union in question, this shouldn't be a problem for you. You might want to check to see if you can continue to have an account with this credit union even when you're no longer employed by your company.

inbox788
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Re: Where To Put My Emergency Fund?

Post by inbox788 » Fri Aug 11, 2017 3:28 pm

DoctorPhysics wrote:Not for everyone but I try to run a lean EF.

3 1-2 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
I've been making adjustment, but settled on similar with simplifications.
Last edited by inbox788 on Fri Aug 11, 2017 3:28 pm, edited 1 time in total.

indexonlyplease
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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 3:28 pm

Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.

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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 3:31 pm

willthrill81 wrote:
Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.

Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
What is the hard cash % of 6 months of expenses??

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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 3:34 pm

willthrill81 wrote:
bob_m10 wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Does that mean Wellesley is sitting in a taxable account?
No, it's in a Roth IRA that I had enough free space in for it a while back.
Would it not be better to max out that Roth with stock funds.

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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 3:38 pm

mhalley wrote:That is perfectly reasonable. The wiki says you could keep the first 3 mos in mm, the next 3 mos in cds and if you desire more than six mos, the next 3 mos in a short term treasury bond fund.

https://www.bogleheads.org/wiki/Emergency_fund
This make really good sense. My question is the risk of the Short term treasury vs the returns. Someone like me in the 25% tax bracket would there been and yield left after paying taxes? Would it be better just putting 1 year cd paying 1.3%??

I am not sure.

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Re: Where To Put My Emergency Fund?

Post by barnaclebob » Fri Aug 11, 2017 3:46 pm

indexonlyplease wrote: What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
Then you sell some taxable investments to cover the credit card. Having a really bad month expense wise, during a really bad stock market year is fairly unlikely and even so, being forced to sell a few grand worth of taxable investments at a low point in crash isn't a huge deal.

I keep 10k in my money market account at the credit union which is the $ amount where I get a small bump in interest rate. I then keep an appropriate extra amount in intermediate tax exempt bonds relative to what my ideal asset allocation would be. The excess in the bonds is effectively my emergency and expected future large expense fund.

Once your taxable investments are large enough you really don't need a segregated emergency fund. Its really a concept for people with low savings amounts or that are just starting out as a buffer to keep them from carrying a balance on a credit card.

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Re: Where To Put My Emergency Fund?

Post by Nicolas » Fri Aug 11, 2017 4:06 pm

indexonlyplease wrote:
Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.
On the turntable: Cat Stevens: Moonshadow

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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 4:22 pm

Nicolas wrote:
indexonlyplease wrote:
Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.
Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.

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Re: Where To Put My Emergency Fund?

Post by c078342 » Fri Aug 11, 2017 5:04 pm

I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.

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Re: Where To Put My Emergency Fund?

Post by Nicolas » Fri Aug 11, 2017 5:10 pm

c078342 wrote:I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.
The problem in that case would come if having to sell in a down market. That's why it's nice to have a few bucks around so you can ride out bear markets without having to touch it.
On the turntable: Cat Stevens: Moonshadow

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Re: Where To Put My Emergency Fund?

Post by livesoft » Fri Aug 11, 2017 5:15 pm

Nicolas wrote:The problem in that case would come if having to sell in a down market. That's why it's nice to have a few bucks around so you can ride out bear markets without having to touch it.
I don't see that as much of a problem at all for millionaires (">> $1kk")
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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Fri Aug 11, 2017 6:11 pm

indexonlyplease wrote:
Nicolas wrote:
indexonlyplease wrote:
Nicolas wrote:
willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.
Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.
We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.

In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Where To Put My Emergency Fund?

Post by ps56k » Fri Aug 11, 2017 6:17 pm

Interesting browsing...

Looking at my Quicken charts.... I have about 6% of my entire portfolio in some form of cash -
Now some of that is part of stocks, bonds, funds, etc -
but most of it is held in.... Chase & Schwab Checking, Ally Bank ladder CD & MM, Vanguard Prime MM.
It is spread around for ease in allocation to other accounts, ATM access, or more Vanguard fund purchases.
And, as far as hard cash - I have about 4 months expenses of real dollars in a drawer...

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Re: Where To Put My Emergency Fund?

Post by jh-1391 » Fri Aug 11, 2017 6:28 pm

c078342 wrote:I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.

If your risk tolerance is fine with "emergency" money being at the mercy of the market,then that's fine. I'm not okay with it. I work in a volatile industry so I'm pretty conservative with my emergency money. I have 6 months of income saved so far which is about 8 months of expenses spread between a few accounts.

1 month as a checking buffer. 2 months in my savings account tied with checking. 2 months (will be 3) in a HYSA where my CC cash back goes, 1 month (eventually 6) in I bonds, and then all excess in a Vanguard LifeStrategy 60/40 fund. It gives me piece of mind, and it helps me keep that money separate. I have other accounts that are just retirement savings (401k, Roth, and taxable) that are a different AA than what I was comfortable with for non retirement monies. Also have accounts for irregular spending and vacations and the like. Just whatever works for the individual.

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Re: Where To Put My Emergency Fund?

Post by indexonlyplease » Fri Aug 11, 2017 6:59 pm

willthrill81 wrote:
indexonlyplease wrote:
Nicolas wrote:
indexonlyplease wrote:
Nicolas wrote:
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.
Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.
We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.

In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.

Makes good sense. Do you think this would work in a taxed account? I know the income from the Wellesley fund you pay dividends and taxed at your rate. But is this the same as interest from savings and cd's.

In another repley I posted the Paul Merriman's

Vanguard Prime Money Market VMMXX First three to six months worth of living expenses
Vanguard Short-Term Corp Bond Index Admiral VSCSX Funds in excess of three to six months of living expenses

This would also pay dividends but less. I think a least. All questions??

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Re: Where To Put My Emergency Fund?

Post by willthrill81 » Fri Aug 11, 2017 7:21 pm

indexonlyplease wrote:
willthrill81 wrote:
indexonlyplease wrote:
Nicolas wrote:
indexonlyplease wrote:
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.

Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.
Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.
We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.

In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.

Makes good sense. Do you think this would work in a taxed account? I know the income from the Wellesley fund you pay dividends and taxed at your rate. But is this the same as interest from savings and cd's.

In another repley I posted the Paul Merriman's

Vanguard Prime Money Market VMMXX First three to six months worth of living expenses
Vanguard Short-Term Corp Bond Index Admiral VSCSX Funds in excess of three to six months of living expenses

This would also pay dividends but less. I think a least. All questions??
I like having some hard cash on hand, but I think that Paul's EF recommendation is fine as well.

I don't think I would change this strategy if I had to hold Wellesley in taxable. The after tax return is still likely to be significantly higher than a muni bond fund; anything else will also require taxes to be paid.

I'm personally fine with Wellesley's far higher returns than money markets or ST bonds. I think it's preferable to overfund your EF by 10-20% in order to avoid insufficient capital when you need it in return for much higher returns. But I'm very much in the minority with this viewpoint. I'm okay with that though. :)
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Taylor Larimore
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Re: Where To Put My Emergency Fund?

Post by Taylor Larimore » Fri Aug 11, 2017 7:34 pm

rattlenap wrote:I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?
rattlenap:

I do not have a separate, low-yielding, "emergency fund" that may never be used.

In the event I should need cash in hurry, I know I can get it from my bank account, credit card, portfolio, bank loan, family, etc..

It is a myth that everyone needs an "emergency fund."
"Our life is frittered away by detail. Simplify. Simplify." -- Henry David Thoreau
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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