Defining your emergency savings account

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Rsanchez
Posts: 21
Joined: Sat Sep 30, 2017 7:22 pm

Defining your emergency savings account

Post by Rsanchez »

Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
Jags4186
Posts: 5494
Joined: Wed Jun 18, 2014 7:12 pm

Re: Defining your emergency savings account

Post by Jags4186 »

Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
My emergency fund is split into 3 or 4 buckets and is constantly being shuffled around into different savings accounts for new account bonuses.
Flyer24
Moderator
Posts: 2580
Joined: Sun Apr 08, 2018 4:21 pm

Re: Defining your emergency savings account

Post by Flyer24 »

I have a mixture of savings account and CDs. It is all with Ally.
alex_686
Posts: 7824
Joined: Mon Feb 09, 2015 2:39 pm

Re: Defining your emergency savings account

Post by alex_686 »

What makes sense to you?

From a strictly rational viewpoint you should not have a emergency fund. Rather you should have a liquidity goal. However that requires a high level of abstraction. It is a trade off between cognitive ease (does it make sense to you, does it address your own behavioral quirks), minimizing cash drag (cash's return tends to be below inflation), ease of access, and preservation of principle. So no right or wrong way.

Options are - or some combination of -
Cash (High Yield Savings)
No penalty CDs.
CD / Treasury / Bond Ladder
Stocks - in which case you probably want to hold double the amount of funds.
HELOC
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Marseille07
Posts: 2287
Joined: Fri Nov 06, 2020 1:41 pm

Re: Defining your emergency savings account

Post by Marseille07 »

I used to like the idea of setting aside EF in cash, until this morning. I am now convinced to simply have 20K in checking, then virtually track my EF amount in excel. This way, the EF money remains invested in the market.

If EF situation really emerges then I would have no problem liquidating necessary AA to make money available. Sure it's not going to be overnight, but the 20K in checking should cover whatever the time gap there might be.
MikeG62
Posts: 3565
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Defining your emergency savings account

Post by MikeG62 »

My emergency fund was always just a component of my taxable investment accounts (some of which were short-term, liquid instruments like muni MMF's (this was back in the day where one could get yield from MMF's), muni bonds or nowadays no penalty CD's (or soon to be maturing CD's that otherwise would be rolled over). I would add to this having something like a HELOC available to draw upon (assuming you own a home) as a sizable source of ready cash in a true emergency. Also toss in credit cards which can float you well over a month for emergency purchases before those expenses need to be paid (to avoid interest charges).

I would not otherwise have 6 or 9 or 12 months of cash sitting in a low or non-interest bearing account simply because I wanted to check the box of having an emergency fund.
Real Knowledge Comes Only From Experience
aristotelian
Posts: 8932
Joined: Wed Jan 11, 2017 8:05 pm

Re: Defining your emergency savings account

Post by aristotelian »

OP, what is your situation and what are you worried about? There are people on here that are retired with eight figures invested. There is literally no scenario where they will ever go into credit card debt or face bankruptcy. You may be just starting out or somewhere in between. Depending on your situation my answer would be completely different.
User avatar
JoeRetire
Posts: 7247
Joined: Tue Jan 16, 2018 2:44 pm

Re: Defining your emergency savings account

Post by JoeRetire »

Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?
You can put the money wherever you choose.
Most put it in a place that is completely safe and liquid - otherwise it sort of defeats the whole purpose.

Mine is in an Ally savings account.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
User avatar
Harry Livermore
Posts: 658
Joined: Thu Apr 04, 2019 5:32 am

Re: Defining your emergency savings account

Post by Harry Livermore »

aristotelian wrote: Sat Nov 28, 2020 8:51 am OP, what is your situation and what are you worried about? There are people on here that are retired with eight figures invested. There is literally no scenario where they will ever go into credit card debt or face bankruptcy. You may be just starting out or somewhere in between. Depending on your situation my answer would be completely different.
Yes, please give us a little more info.
I have been self-employed for over 30 years and essentially have no safety net (while I do earn some money via payroll, it's not enough, nor is it consistent enough, to ensure an unemployment check if work slows or stops) Once I bought a house, a piece of my personality permanently shifted into paranoid mode :) and I wanted to always be sure that I could weather a 1- or 2- year dry spell.
As a result, I keep a little over 12 months' expenses in a standard-issue savings account at BOA (where we have all of our checking, HELOC, and by coincidence, our mortgage) I have another couple of months at Marcus/ Goldman, and another couple in my sweep account at Etrade (that money had been earmarked as "dry powder" to use during a market correction but THIS "market correction" involved my business going to zero, a first for me) We also have 4-5 years in taxable investments between Vanguard and Etrade. The trouble with having ONLY that, and nothing in savings, is that I believe in Murphy's Law, and I expect that my investments will be down 50% when I coincidentally "need" the money.
Some here would (and have) criticized my "bucketing" and somewhat artificial demarcation of "this money" and "that money". I know it's all one pot. In my thinking, the security (for a self-employed person especially) of having ready cash when the world is temporarily losing its mind, is FAR more valuable than the "drag" of losing 2% per year due to inflation, or the "opportunity cost" of making more money in the market.
For reference, we have about 30x annual expenses, including the emergency fund. Would we be richer if I "invested" that 1/30th? Maybe.
Also: do you have life insurance? What about long-term disability? Often overlooked and more important in some circumstances than life insurance.
Looking forward to some more info!
Cheers
User avatar
JoMoney
Posts: 10909
Joined: Tue Jul 23, 2013 5:31 am

Re: Defining your emergency savings account

Post by JoMoney »

I keep a small amount of physical cash around. I expect that would get me through most 'emergencies' that might include a power outage, bank network failure, or many other scenarios.
Beyond that, I'm somewhat open to the idea that you could decide your entire portfolio is your "emergency fund", and you don't need to bucket it for specific things.... but I'm also partial to the idea that I sleep well knowing I can ignore whatever the stock market is doing because even in an emergency I wouldn't be touching those investments any time soon.

Beyond the physical cash I have around, the rest of my 'safe' money is in high-yield savings accounts and Series I Savings Bonds.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
anon_investor
Posts: 5289
Joined: Mon Jun 03, 2019 1:43 pm

Re: Defining your emergency savings account

Post by anon_investor »

JoMoney wrote: Sat Nov 28, 2020 10:16 am I keep a small amount of physical cash around. I expect that would get me through most 'emergencies' that might include a power outage, bank network failure, or many other scenarios.
Beyond that, I'm somewhat open to the idea that you could decide your entire portfolio is your "emergency fund", and you don't need to bucket it for specific things.... but I'm also partial to the idea that I sleep well knowing I can ignore whatever the stock market is doing because even in an emergency I wouldn't be touching those investments any time soon.

Beyond the physical cash I have around, the rest of my 'safe' money is in high-yield savings accounts and Series I Savings Bonds.
I have a very similar set up to you, but with some no penalty CDs which expire next year and the proceeds will be used to buy more I Bonds. The current 1.76% composite rate for new I Bonds sure beats the 0.6% rate for new no penalty CDs...
epictetus
Posts: 634
Joined: Sat Mar 10, 2007 6:43 pm

Re: Defining your emergency savings account

Post by epictetus »

an online savings account can work well for your emergency fund. it can be linked to your checking account for easy transfer in/out as needed
Focus on what you can control
Bama12
Posts: 401
Joined: Fri Aug 30, 2019 11:48 pm

Re: Defining your emergency savings account

Post by Bama12 »

Job Lose--
3 Months Income Savings Local Bank
3 Months Income Vanguard Federal M.M-VMFXX
3 Months Income Vanguard Total Stock Market-VTI
3 Months Income Vanguard Wellesley Income-VWINX (Roth)


Things happen--
10,000 Savings local Bank
Dottie57
Posts: 9739
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Defining your emergency savings account

Post by Dottie57 »

JoeRetire wrote: Sat Nov 28, 2020 9:08 am
Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?
You can put the money wherever you choose.
Most put it in a place that is completely safe and liquid - otherwise it sort of defeats the whole purpose.

Mine is in an Ally savings account.
+1
TravelforFun
Posts: 2299
Joined: Tue Dec 04, 2012 11:05 pm

Re: Defining your emergency savings account

Post by TravelforFun »

Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
I've no emergency account. I can take care of any emergency with a couple of credit cards and some bond mutual funds that I can quickly sell to pay off the credit card balances.

TravelforFun
Topic Author
Rsanchez
Posts: 21
Joined: Sat Sep 30, 2017 7:22 pm

Re: Defining your emergency savings account

Post by Rsanchez »

aristotelian wrote: Sat Nov 28, 2020 8:51 am OP, what is your situation and what are you worried about? There are people on here that are retired with eight figures invested. There is literally no scenario where they will ever go into credit card debt or face bankruptcy. You may be just starting out or somewhere in between. Depending on your situation my answer would be completely different.
I guess I’m a bit fixated on establishing a pure emergency fund in a savings account where I have 6 months of expenses. I’m trying to put things in perspective for myself to ease the anxiety.

So 6 months of expenses for me is about $30k. In cash, I have $13k, an whole life insurance/annuity worth $12, and a brokerage account worth $16k. Retirement funds are at $150k and a health savings account with $7.5k. I feel like this is good, and not sure if I ahold consider all or parts of these buckets as “emergency fund”. I don’t own a home or any other assets. Only debt is about $40k in fixed rate students loans (at4% and ends in 2024) and $2k in credit cards - credit card I pay of monthly.

Thanks for your feedback.
aristotelian
Posts: 8932
Joined: Wed Jan 11, 2017 8:05 pm

Re: Defining your emergency savings account

Post by aristotelian »

Rsanchez wrote: Fri Dec 04, 2020 8:59 pm I guess I’m a bit fixated on establishing a pure emergency fund in a savings account where I have 6 months of expenses. I’m trying to put things in perspective for myself to ease the anxiety.

So 6 months of expenses for me is about $30k. In cash, I have $13k, an whole life insurance/annuity worth $12, and a brokerage account worth $16k. Retirement funds are at $150k and a health savings account with $7.5k. I feel like this is good, and not sure if I ahold consider all or parts of these buckets as “emergency fund”. I don’t own a home or any other assets. Only debt is about $40k in fixed rate students loans (at4% and ends in 2024) and $2k in credit cards - credit card I pay of monthly.

Thanks for your feedback.
You can call it whatever you want. The important thing is to have a drawdown strategy should you need the cash. Sounds like you need a little bit more cushion. One thing you can do is invest a portion of your Roth IRA in cash or safe bonds. That would allow you to continue maxing your Roth but would give your emergency fund an additional backstop should you need it (Roth contributions can be pulled out with no tax or penalty).
jumbopapa
Posts: 123
Joined: Thu Aug 30, 2018 7:56 am

Re: Defining your emergency savings account

Post by jumbopapa »

I came across this blog post the other day: https://upwarding.com/2019/10/12/do-not ... s-instead/

It suggests that you should not use a high yield savings account, but instead have a 88% bond/12% stock portfolio in place as your "emergency fund".

It goes on to say that yield is superior to a high yield savings account, but volatility is somewhat consistent.

I'm not sure how I feel about it, but I would love to hear this communities thoughts.
jsapiandante
Posts: 174
Joined: Thu Jul 30, 2015 5:58 pm

Re: Defining your emergency savings account

Post by jsapiandante »

I have 3 months expense in checking account. Rest is in a muni bond fund in my taxable. I used to have 6 months in a savings account, but once I reached one years worth of expense in my taxable, I figured I can take the risk by investing as much as possible.
IMO
Posts: 1209
Joined: Fri May 05, 2017 6:01 pm

Re: Defining your emergency savings account

Post by IMO »

I think the specifics of an emergency savings account varies on a number of factors, including things like if your still employed, how much your monthly/annual expenses are, etc.

For simplicity, lets say your entering retirement and you've reached "egg" is $1M for which you need to withdraw 4% for your "lean" annual budgeted expenses of $40K year. But a couple big things came up and one year you had to pull out an extra $30K for some emergency things. Then a few yrs later, something came up and you needed another $20K, etc, etc. If those emergency expenses keep popping up, next thing you know your withdrawal rate may be more than 4% and/or you had to withdraw money during bad years in the stock market. Seems to me like a concern.

Thus, I think one should keep in there retirement nest egg, an emergency account in some liquid vehicle, be it a saving account or other. Additionally, one should have in their retirement budget, a savings category to assure they are able to replenish their desired emergency account.

Now if your working and withdraw money from your future retirement nest egg, that's a different animal. You can just keep working or work more to make up for that.

Also another reason not to retire "lean" with no means to scale back if needed for unexpected emergency expenses.
pasadena
Posts: 1037
Joined: Sat Jul 02, 2016 1:23 am
Location: PNW

Re: Defining your emergency savings account

Post by pasadena »

Rsanchez wrote: Fri Dec 04, 2020 8:59 pm
aristotelian wrote: Sat Nov 28, 2020 8:51 am OP, what is your situation and what are you worried about? There are people on here that are retired with eight figures invested. There is literally no scenario where they will ever go into credit card debt or face bankruptcy. You may be just starting out or somewhere in between. Depending on your situation my answer would be completely different.
I guess I’m a bit fixated on establishing a pure emergency fund in a savings account where I have 6 months of expenses. I’m trying to put things in perspective for myself to ease the anxiety.

So 6 months of expenses for me is about $30k. In cash, I have $13k, an whole life insurance/annuity worth $12, and a brokerage account worth $16k. Retirement funds are at $150k and a health savings account with $7.5k. I feel like this is good, and not sure if I ahold consider all or parts of these buckets as “emergency fund”. I don’t own a home or any other assets. Only debt is about $40k in fixed rate students loans (at4% and ends in 2024) and $2k in credit cards - credit card I pay of monthly.

Thanks for your feedback.
It's ok if it takes a while to get there. You already have 3 months, that's good. Took me a year to get to 6 months.

The common sense advice is to keep this money in a very safe place until your brokerage account is big enough that it could provide the emergency money if the market fell 50%. At that point some people reconsider the "6 months" part and go with a smaller EF, or divide it into buckets that will be in different savings vehicles, some with 0 risk, some with a little bit of risk. But you're not there yet.

You also want to keep this money liquid, and easily accessible. When you do reach 6 months or above, you can also decide to put *some* of it in very safe but not liquid accounts, like CDs. But again, you're not there yet (IMO).

So your options are:
- "High" yield savings accounts (HYSA). They yield next to nothing these days, but that's life. I would recommend Ally if you're looking for a good bank.
- No-penalty CD. They also don't yield much at all, sometimes less than HYSA. Ally has some good ones (but the rates are bad these days)
- Money Market fund.

I keep mine in a money market fund at Vanguard. The rate of return is abysmal, less than a HYSA at Ally, but I like having it out of my bank (out of sight, out of mind). Keeps it safer from myself. Not everybody has this problem :twisted:
jerrysmith
Posts: 32
Joined: Sat Feb 16, 2019 2:20 pm

Re: Defining your emergency savings account

Post by jerrysmith »

A regular old savings account at CapitalOne. Not worth the time for me to chase offers etc. It's fine just sitting there.
VictorStarr
Posts: 145
Joined: Sat Jan 04, 2020 10:13 pm
Location: California

Re: Defining your emergency savings account

Post by VictorStarr »

People take a notion of the emergency fund too literally. Keeping 6-12 months of spending in FDIC insured savings account does not make sense to me.

I never had an emergency fund stored in a designated checking/savings/CD bank accounts. I consider part of my taxable investments as an emergency fund. Currently, I have around 30% of my taxable account allocated to fixed income invested in muni bond funds. I can always withdraw from my taxable account. I accepted risk that muni bonds can have price fluctuations. As a result I enjoy higher return (4.16% over last 10 years for VCAIX) and do not need a separate savings/CD accounts.
User avatar
Devil's Advocate
Posts: 373
Joined: Thu Feb 16, 2012 5:18 pm

Re: Defining your emergency savings account

Post by Devil's Advocate »

alex_686 wrote: Fri Nov 27, 2020 6:04 pm What makes sense to you?

From a strictly rational viewpoint you should not have a emergency fund. Rather you should have a liquidity goal. However that requires a high level of abstraction. It is a trade off between cognitive ease (does it make sense to you, does it address your own behavioral quirks), minimizing cash drag (cash's return tends to be below inflation), ease of access, and preservation of principle. So no right or wrong way.

Options are - or some combination of -
Cash (High Yield Savings)
No penalty CDs.
CD / Treasury / Bond Ladder
Stocks - in which case you probably want to hold double the amount of funds.
HELOC
Roth
HSA
401k

DA
life in slices
Posts: 189
Joined: Mon Apr 15, 2019 6:00 pm

Re: Defining your emergency savings account

Post by life in slices »

EFs for me is multilayered

- HY savings account
- iBonds
- HSA (pulling out amounts already spend on healthcare)
- Roth

As I have entered my 50s, I do feel the pull to have more of my annual expenses in some sort of accessible EFs
Have seen a few of my friends and colleagues go through extended unemployment (1-2 years) in this age group when laid off.
My job is pretty stable, and I don't think it would take long to find a new job, but want to have some options if it happens
UpperNwGuy
Posts: 4766
Joined: Sun Oct 08, 2017 7:16 pm

Re: Defining your emergency savings account

Post by UpperNwGuy »

Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
It can be whatever you want it to be. Some keep it in cash. Some invest it. But you already knew that, so what are you really asking? Are you just taking a survey of members?
User avatar
Harry Livermore
Posts: 658
Joined: Thu Apr 04, 2019 5:32 am

Re: Defining your emergency savings account

Post by Harry Livermore »

Harry Livermore wrote: Sat Nov 28, 2020 10:08 am
We also have 4-5 years in taxable investments between Vanguard and Etrade. The trouble with having ONLY that, and nothing in savings, is that I believe in Murphy's Law, and I expect that my investments will be down 50% when I coincidentally "need" the money.
To follow up on this, I chose to sell some of my VTSAX in taxable this week. I did so because we have been siphoning off some of our cash savings during the last 9 months, as my business has ground to a halt. The cash available in the EF was down a bit.
I had observed that we were at all-time market highs, and while I am not really a "market timer", it seemed "timely". $92.23 a share! Of course it gained Friday, but still. Not bad for "timing". I also sold only the newest lots that qualified for LT gains.
For perspective, I took something like 12% out of VTSAX, and it topped off our EF to where it was at the start of 2020. If we are still shut down come March/ April/ May, and the market is also down, it will have been better to sell now at the highs. I'll still be "spending" out of that pot. If my business picks up and the market is full steam ahead, and I did not need the money, then "oh well". I will have missed out on gains, but won't need to add to the EF. Just trying to strike a balance.
Cheers
oldlongbeard
Posts: 92
Joined: Tue Oct 23, 2018 11:07 am

Re: Defining your emergency savings account

Post by oldlongbeard »

aristotelian wrote: Fri Dec 04, 2020 9:17 pm
Rsanchez wrote: Fri Dec 04, 2020 8:59 pm I guess I’m a bit fixated on establishing a pure emergency fund in a savings account where I have 6 months of expenses. I’m trying to put things in perspective for myself to ease the anxiety.

So 6 months of expenses for me is about $30k. In cash, I have $13k, an whole life insurance/annuity worth $12, and a brokerage account worth $16k. Retirement funds are at $150k and a health savings account with $7.5k. I feel like this is good, and not sure if I ahold consider all or parts of these buckets as “emergency fund”. I don’t own a home or any other assets. Only debt is about $40k in fixed rate students loans (at4% and ends in 2024) and $2k in credit cards - credit card I pay of monthly.

Thanks for your feedback.
You can call it whatever you want. The important thing is to have a drawdown strategy should you need the cash. Sounds like you need a little bit more cushion. One thing you can do is invest a portion of your Roth IRA in cash or safe bonds. That would allow you to continue maxing your Roth but would give your emergency fund an additional backstop should you need it (Roth contributions can be pulled out with no tax or penalty).
I concur with the Roth IRA as a holder for your emergency fund. I have enough life behind me to realize while emergencies DO happen, it is far more likely this $$ will GROW, if invested in equities. As pointed out, any CONTRIBUTIONS can be withdrawn at any time for any reason with no tax or penalty.
Regards,
Greg in West Mitten
MikeG62
Posts: 3565
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Defining your emergency savings account

Post by MikeG62 »

Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
It was always just part of (a very small part of) my taxable savings/investment accounts. I never ring-fenced it as such. Keep in mind that your credit cards can carry you for some of your spending needs for up to 60 days without interest, if push comes to shove. If you have a HELOC on your home, that's another option as well. It's not like the e-fund is the only avenue you have in an emergency.
Real Knowledge Comes Only From Experience
gonefishing01
Posts: 218
Joined: Wed Aug 19, 2015 9:09 pm

Re: Defining your emergency savings account

Post by gonefishing01 »

Dedicated money market account at my credit union. Never touch it except to skim off the top to add to brokerage when the interest builds it up a ways over my 6 month expenses threshold. Which, in the current low interest environment, takes a LOT longer than it used to. Yeah, it’s losing. But I have a portfolio of like 90% equities and think of the cash as part of my “bond” allocation right now.
Topic Author
Rsanchez
Posts: 21
Joined: Sat Sep 30, 2017 7:22 pm

Re: Defining your emergency savings account

Post by Rsanchez »

UpperNwGuy wrote: Sat Dec 05, 2020 7:38 am
Rsanchez wrote: Fri Nov 27, 2020 5:55 pm Novice question....

Is your 6-month emergency saving suppose to in cash only or otherwise? How do you have your emergency fund set up?

Thank you.
It can be whatever you want it to be. Some keep it in cash. Some invest it. But you already knew that, so what are you really asking? Are you just taking a survey of members?
Definitely taking a survey. I had forgotten that I could pull from my Roth, so I never considered that an EF. Appreciate the education and change in perspective. Feel a sense of relief. Thank you.
SquirrelEater
Posts: 61
Joined: Mon May 18, 2020 9:02 pm

Re: Defining your emergency savings account

Post by SquirrelEater »

Placing the EF in a FDIC insured account is a good textbook answer.

Cash smells & feels good. I once had a large portion in cash when I was finally getting my financial life on track years ago. It felt great to see the money in that quantity having gone so long since having that much. The smell was intoxicating. Almost had a lipstick smell to it which was interesting & maybe a bit arousing. But eventually I lost my excitement for her (the cash). She wasn't worth keeping around for fun so I sent her to an online savings account (FDIC) to make little money babies. Been happier ever since.

Going outside of FDIC requires some time at the mirror & the book/computer.

These days, my "EF" is now mostly in a US total bond fund (FXNAX), with a small pinch in a World Bond Fund (FBIIX) for fun. Not in any FDIC accounts. Higher returns are possible I suppose... and potentially playing with fire(Opinions vary).
"Savings" is all in taxable brokerage account now. Was 100% equities but lost my testicular fortitude on that recently. Now I carry a roughly a six month bond fund amount & can return to an aggressive contribution(technically my new contribution allocation, December onward, is less aggressive now being 85/15 instead of 100/0 allocation of prior).

But there is a little more to my EF Fund story here. A credit card will be my first line of defense. I can't imagine a reasonable (non-WROL/non-SHTF/non-TEOTWAWKI) emergency that cant be fixed with a credit card these days. Many contractors take them, all stores of consequence do, and online bill pay will take them for paying utilities. I hear you can even pay your mortgage with them with some creativity. This is the rapid liquidity with zero opportunity loss cost. Like bonds, there is some fire here too that can get myself/people in trouble... .
User avatar
Garco
Posts: 785
Joined: Wed Jan 23, 2013 2:04 am
Location: U.S.A.

Re: Defining your emergency savings account

Post by Garco »

I use my credit union (CU) as my all-purpose bank. In general I do not keep a large sum of "cash" in my account. My paychecks and Social Security and RMD's all to to my CU. I have a Visa account at this CU. But what if I am short of cash, perhaps in an emergency?

I have no emergency savings account. But I have a HELOC of $60K at my CU. I have drawn on this a couple of times when I needed an immediate downpayment on something (car, house).

If I needed more than that amount, I would draw on other cash accounts or credit lines at my CU, where I do my regular banking and "saving". I also have a large short-term LOC in my "cards" at American Express and Visa (combined ca. $50K).

The above are all approaches that would not require me to immediately sell invested holdings in my brokerage or long-term investment accounts (including those with tax-deferred holdings -- 403b, TIRA).
Post Reply