This in all practicality means less than half of Americans don't have money to cover $500.00 in expenses that might arise unexpectedly.
And yet it seems the restaurants and coffee shops are full. Assuming most on this forum are frugal and have an EF, what does it consist of dollar wise ?
How much do you have in your emergency fund , and how often did you use it in the last year ?
I have a three tiered emergency fund. The first tier I have used almost every other month for some expense. The second I have used a couple times in the last few years. Fortunately, I haven't had to tap my real "it hit the fan" emergency fund which is fine with me, as I am using my Roth IRA for that. I am in the process of building a buffer fund to hit before I have to hit my Roth--thus building a 4-tiered approach.
My funds look like this:
1. I keep a savings account at my primary bank which is my overdraft protection. I try to keep a few thousand in this and I use my checking account as a transfer station--i.e. paycheck comes in, bills get paid. If there is a cash flow issue, my savings will cover it. I don't have any overdraft protection via a credit card anymore. Both of these accounts are in a credit union which won't allow that.
2. Online bank account where I try to keep about $3200 in case of an "unexpected" charge such as a care repair, new tires, or some other "major" issue. Unfortunately, I have had to tap and rebuild this account several times a year. Thank heavens for tax returns so I can refund the account.
3. NEW. I am building an I bond fund to be my real major fund for items like a new HVAC or other like issue. Such an issue would overwhelm the above accounts but having some cash in bonds would act as a nice buffer. Right now I am using zero interest cards to fill this gap. I am hoping to build this fund within the next couple years.
4. ROTH. This was my original major emergency fund. My earlier reasoning was that I could put a heavy charge onto a credit card and in the mean time transfer money from my ROTH to cover the payment. I had a hard time justifying keeping a lot of money in cash, so I put it into my retirement fund but in an account that I could access should the need arise. With my new system, this will be a catastrophic account--i.e loss of job and needing 6 months to find a new one. As I write this, my ROTH is still my Armageddon account, but I am hoping to build my I bond fund enough to make this account moot.
On the bright side, if I never need either the ROTH or even the I bond account, I will have some nice tax-advantaged money in retirement to take some nice vacations!!!
I have struggled to fund these accounts. I suspect that I don't make the money that many of the posters here earn. However, I have had several occurrences where I was really glad to have the savings. With my personality, it is helpful to have the separate funds, as if I had some extra cash in my checking account, I wouldn't have any extra cash in my checking account!