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Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:37 pm
by JB2013
Hi everyone. I'm wondering if people have ideas or suggestions on whether I should park my emergency fund someplace other than a high yield savings account. I currently max out my 401K, have both our Roth IRAs maxed for the year. I am married with 3 kids (all ages 7 and under). We are 35 years old.

I currently have 21K for emergency fund. I know the high yield savings is the safest bet, but wondering if putting this in a balanced index fund would be worth any consideration. We are hoping to save for a remodel as well.

I do have a brokerage account and contribute to ITOT through fidelity. Any ideas/thoughts would be helpful. Thank you!

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:41 pm
by RyeBourbon
How will you feel if you have an emergency and have to liquidate it at $18K?

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:44 pm
by Mike Scott
If you put "enough" into your brokerage and are willing to sell whether it is up or down when you need the money, you may be able to skip the high yield savings. Or just keep it in the high yield savings. It may not make much money sitting in savings but it will be there when you need it.

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:46 pm
by JB2013
RyeBourbon wrote: Wed Sep 16, 2020 1:41 pm How will you feel if you have an emergency and have to liquidate it at $18K?
I guess I'm not sure what you mean. Do you mean how will I feel if I have to spend 18K of my emergency fund? If that's your question...obvisouly not good, lol

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:47 pm
by brad.clarkston
With a family that big, that young, plus only $21k I would never dream of putting my EF in anything other than a HYSA with a local bank.

Now if you said you had $40k I would say half in a HYSA and half in no penalty CD's

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:48 pm
by RyeBourbon
JB2013 wrote: Wed Sep 16, 2020 1:46 pm
RyeBourbon wrote: Wed Sep 16, 2020 1:41 pm How will you feel if you have an emergency and have to liquidate it at $18K?
I guess I'm not sure what you mean. Do you mean how will I feel if I have to spend 18K of my emergency fund? If that's your question...obvisouly not good, lol
How would you feel if the 21K you were saving decreased in value to 18K just when you needed it most?

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:48 pm
by brad.clarkston
JB2013 wrote: Wed Sep 16, 2020 1:46 pm
RyeBourbon wrote: Wed Sep 16, 2020 1:41 pm How will you feel if you have an emergency and have to liquidate it at $18K?
I guess I'm not sure what you mean. Do you mean how will I feel if I have to spend 18K of my emergency fund? If that's your question...obvisouly not good, lol
I think he means the loss of $3k after liquidation.

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:52 pm
by Texanbybirth
Same situation as you, except one more kid due soon. I leave our EF in cash. We've got enough money (and future contributions) working in the market. The EF doesn't need to be part of it, IMO. :beer

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:53 pm
by RyeBourbon
brad.clarkston wrote: Wed Sep 16, 2020 1:48 pm
JB2013 wrote: Wed Sep 16, 2020 1:46 pm
RyeBourbon wrote: Wed Sep 16, 2020 1:41 pm How will you feel if you have an emergency and have to liquidate it at $18K?
I guess I'm not sure what you mean. Do you mean how will I feel if I have to spend 18K of my emergency fund? If that's your question...obvisouly not good, lol
I think he means the loss of $3k after liquidation.
Right. I guess I'm saying that it's up to each of us to decide how much risk to take. Usually we take the least amount of risk with emergency funds and money we will need in the short term.

Re: Where to put emergency fund money?

Posted: Wed Sep 16, 2020 1:53 pm
by Mike Scott
Stock prices don't always go up. You may need the money when stocks are down. You may have enough money that you don't care either way.

Re: Where to put emergency fund money?

Posted: Thu Sep 17, 2020 8:19 pm
by Fishing50
Saving for a remodel & emergency fund are 2 different goals.

Savings for a defined project should be in a savings account.

EF is for unexpected emergencies. If you have significant taxable investments and job security, you can have your EF invested in ITOT which you can sell if you need to raise cash. You can put Unexpected expenses on a credit card and pay the bill over a couple month if you want to avoid capital gains tax. To help pay the bill, you can take dividends in cash to assist payments or reinvest. Compound growth of $21K over decades can be significant, compared to meager returns of cash. ITOT is more tax efficient than a balanced fund.

At 50yrs old with a military pension in 2yrs and 6 digit taxable assets, we have no EF.

Re: Where to put emergency fund money?

Posted: Thu Sep 17, 2020 8:36 pm
by anon_investor
Fishing50 wrote: Thu Sep 17, 2020 8:19 pm Saving for a remodel & emergency fund are 2 different goals.

Savings for a defined project should be in a savings account.

EF is for unexpected emergencies. If you have significant taxable investments and job security, you can have your EF invested in ITOT which you can sell if you need to raise cash. You can put Unexpected expenses on a credit card and pay the bill over a couple month if you want to avoid capital gains tax. To help pay the bill, you can take dividends in cash to assist payments or reinvest. Compound growth of $21K over decades can be significant, compared to meager returns of cash. ITOT is more tax efficient than a balanced fund.

At 50yrs old with a military pension in 2yrs and 6 digit taxable assets, we have no EF.
Fishing50, thank you for your service.

The job security is the kicker. This current crisis has proven that many people do not have true job security. The OP should keep the EF in safe assets.

I have my emergency fund in a mix of Series I Savings Bonds ("I Bonds") and no penalty CDs.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 12:00 am
by Bama12
My emergency is with local credit union.
I keep 3 month of income in savings, this money is for job lose only.
I also keep 10k in saving for home repairs if needed.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 12:19 am
by softwaregeek
Mike Scott wrote: Wed Sep 16, 2020 1:53 pm Stock prices don't always go up. You may need the money when stocks are down. You may have enough money that you don't care either way.
You WILL need the money when the market is down. That's when you need the emergency fund the most. In a severe downturn, even the most secure jobs can be lost. I am watching my local school district toss out some teachers this year, and you can bet a lot of people who were *sure* that their safe government or academic jobs were forever are going to be out of luck.

I notice others mention the no-penalty CD's but I prefer the high-yield savings account. I use both Ally Savings and JPST (ultra-short bond fund) but there are many good online banks for high yield savings. Others prefer local banks but you will get lower rates. Plus about 3 months in my 'operating' checking account at Schwab with my wife. I do give up some interest on that account versus, for example, Ally, but the higher quality Schwab service is important to me for an account I run my transactions through.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 7:21 am
by johnny
Lots of ideas on this in the wiki: https://www.bogleheads.org/wiki/Emergency_fund

I keep mine split between high yield savings account and no penalty CDs.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 9:53 am
by brianonearth
I think of the low interest paid on FDIC guaranteed, readily available savings accounts as an insurance payment. I've always liked to keep 6 months to a year's worth of expenses in some combination of bank savings & CDs, plus, to some extent, money market accounts. (Although the latter don't seem to be as reliable or lucrative as they once were.) The income or potential asset appreciation I forego is just a cost of financial security.

Of course, feelings about insurance reflect your personality and risk assessments. I've always wanted more financial security. Your desires and situation undoubtedly vary.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 10:18 am
by familythriftmd
I'm wondering if it just makes sense to keep it in whatever bank tends to have the most user-friendly apps and websites for you. If you do index fund investing for growth, I don't know if relatively-small interest rates on a low five-figure sum would even make much of a difference.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 10:29 am
by gr7070
I keep three months in HYS and three months in taxable mutual funds.

There is no need to have all your EF in cash.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 10:51 am
by abuss368
JB2013 wrote: Wed Sep 16, 2020 1:37 pm Hi everyone. I'm wondering if people have ideas or suggestions on whether I should park my emergency fund someplace other than a high yield savings account. I currently max out my 401K, have both our Roth IRAs maxed for the year. I am married with 3 kids (all ages 7 and under). We are 35 years old.

I currently have 21K for emergency fund. I know the high yield savings is the safest bet, but wondering if putting this in a balanced index fund would be worth any consideration. We are hoping to save for a remodel as well.

I do have a brokerage account and contribute to ITOT through fidelity. Any ideas/thoughts would be helpful. Thank you!
I simply use a Vanguard Federal Money Market fund. For good reason the old saying of “cash is king” is very true.

I look at cash as principal and sleep well at night first and return as second.

I really don’t bother to move around to make a few bucks more in interest.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 12:15 pm
by hudson
JB2013 wrote: Wed Sep 16, 2020 1:37 pm Hi everyone. I'm wondering if people have ideas or suggestions on whether I should park my emergency fund someplace other than a high yield savings account. I currently max out my 401K, have both our Roth IRAs maxed for the year. I am married with 3 kids (all ages 7 and under). We are 35 years old.

I currently have 21K for emergency fund. I know the high yield savings is the safest bet, but wondering if putting this in a balanced index fund would be worth any consideration. We are hoping to save for a remodel as well.

I do have a brokerage account and contribute to ITOT through fidelity. Any ideas/thoughts would be helpful. Thank you!
A high quality/low expense bond fund would work....something like total bond, GNMA, or intermediate muni. If these funds dropped in value, I doubt if it would be catastrophic.
You already know the safest choice.

Re: Where to put emergency fund money?

Posted: Fri Sep 18, 2020 12:33 pm
by lostdog
BSV ETF

Vanguard Short-Term Bond ETF

https://investor.vanguard.com/etf/profile/BSV