I've never been really convinced that money is fungible. It's not, always, is it?H-Town wrote: ↑Thu Aug 20, 2020 11:26 am It's great that you do a sanity check on emergency funds.
Everyone's situation is different. You can't have a blanket emergency fund for everyone. So there is no simple answer that works for everyone.
However be careful to venture into mental accounting. Money is fungible. You should analyze your asset allocation as a whole, and not based on "buckets".
Money in a Roth IRA is good for a lot of things. A place to stash contributions until you get enough for a 20% house down payment, then remove the contributions and leave the earnings behind to keep growing and keep the account open for future contributions. (I did this.) Money in a Roth is also good for tax diversification in early retirement if you are figuring out how much you can work and still draw Social Security. And Roth money can be an extended emergency fund in case of unemployment.
Money in a traditional IRA is not "fungible" with money in a Roth. They are two different buckets. You can't pull out the traditional IRA monies without penalty for any purpose, though I do think you can pull out some for a first time home purchase. And part of that money isn't yours because you have to pay taxes. Your money can't move freely to other purposes, which is what fungible means, right?
Money deposited with a new bank to get a sign-on bonus is not fungible with money you have in your old bank. The new bank has restrictions: you have to keep $15,000 in there for 6 months, and make X number of debit card purchases, etc. The banker is in the driver's seat for 6 months while you fulfill the requirements. The money in your old bank, well you are in the driver's seat. They are two different buckets.
Money you hope to get as a 401(k) match is not fungible with any other money you have. First you have to commit some portion of your income to get it, then you have to wait until your employer begins to match, then you have to wait to be fully vested, then you have to hope your employer does not discontinue the match. A different bucket from anything else entirely.
No, emergency funds are not for suckers. This is money that you own, money you can fold over and put in your pocket, money that really is "fungible" and can move anywhere.