Comments on: Emergency Savings Fund: Why, How Much, and Where?

By: Setting Goals: 5 Financial Milestones to Aim for By Age 30

Setting Goals: 5 Financial Milestones to Aim for By Age 30 — Sat, 02 Jan 2010 03:25:13 +0000

[...] that it was only for 3 months — it has taken many others much longer to recover. Without our emergency fund to back us up, we might have had to rack up high-interest consumer debt. Had it been longer, we [...]

By: me

me — Tue, 22 Dec 2009 23:56:04 +0000

I got a dollar. I’m hoping on having two dollars in a couple years.

By: Matt

Matt — Sun, 13 Sep 2009 05:52:57 +0000

Michael,
You said what you said a couple of months before the market went down. I’m assuming that you don’t feel the same way now. What you’re doing is great as long as there is a minimum of 8 months worth of expenses of “cash” available to use immediately (given that credit card balances, if any, are paid off). Put the cash in a high yield account and you can’t go wrong. It’s not a matter of “if” you would have to tap into it. These days it’s a matter of “when” it you would tap into the cash. There is truth to the saying “Cash is King!”

By: The Why and How of Setting up an Automatic Savings Plan | A Personal Finance Blog for 20-Somethings

Wed, 25 Feb 2009 02:13:57 +0000

[...] 1. In case of an emergency. A savings account can act like a sort of fire extinguisher when an unexpected catastrophe puts fire to your wallet. It’s a good idea to have three to six months of living expenses socked away in case of a job loss. That might take some time to build, so in the meantime, put aside $1,000 to help pay for sudden expenses. Then, build your ideal emergency fund. [...]

By: How to Start Saving for an Emergency Fund | BudgetPulse

How to Start Saving for an Emergency Fund | BudgetPulse — Tue, 03 Feb 2009 19:24:23 +0000

[...] sure to have savings. When anything goes wrong, there is nowhere to go for funds. Create an emergency fund. Try to have at least twelve months of regular monthly expenses saved. Put the rest of the money [...]

By: Chris

Chris — Mon, 17 Nov 2008 22:24:01 +0000

I agree. With these rough financial times, I believe more people are going to realize just how critical it is to have an emergency fund. I also agree with those funds being very liquid with quick easy access. High interest savings accounts may be one of the better options. I’ve been concerned though about the safety of my safety net given the current banking crisis. I was unaware that the FDIC had changed its limits. Then I came across this at my online bank.

FDIC now insures up to $250,000 per depositor. Individual and joint accounts are insured separately, so if you have both types of accounts, your total deposits can be insured up to $500,000; thatÃ¢â‚¬â„¢s up to $250,000 in all your individual accounts and up to an additional $250,000 in your joint accounts.

source: VentureBankDirect.com/faqs.php

By: Amanda

Amanda — Sat, 23 Aug 2008 04:27:46 +0000

I have $10,000 laddered in four CDs at ING at three month intervals. This way I don’t have to cash in ALL of the emergency fund at one time, and I lose only a bit of interest.

By: Michael

Michael — Tue, 24 Jun 2008 00:03:08 +0000

Dan-

Thanks for the explanation. Not wanting to sell at a low makes sense, but I still don’t see how that makes cash a superior option. If a mutual fund grows at 10% on avg, but sheds 3% the day before I need to use it as an emergency fund, isn’t that still better than a MMA that grows at 3% overall?

There’s a chance the fund grows less than an MMA over the years it’s sitting in an emergency fund, but from what I understand that seems unlikely. Am I missing something here?

By: Dan

Dan — Mon, 23 Jun 2008 21:27:22 +0000

Micheal-
The downside to that (depending on your investments in emergency) is not the lack of liquidity (most likely at most 4 business days in your case) but rather “timing risk”. The risk that your water heater/furnace/car/muffy-your-favorite-dog needs a sudden wad of cash thrown at it just as the market decides to shed 3%… I would much rather pull money out of a seperate cash account (savings, mma, etc.) than sell-at-the-bottom (noone gets rich doing that).

By: J Dawg

J Dawg — Thu, 12 Jun 2008 22:00:20 +0000

I got $3000 right now and I am hoping to get it to $6000. It is at ING Direct. I would not worry about interest really this money is not about earnings it is just about a safety net besides there is no place you are going to put it that will yield a high enough interest rate to keep up with inflation and still be liquid. You are going to pay taxes on the interest made and that means if inflation is figured at 6% annually you will have to be around 9% and I have yet to find anything around that, that would allow immediate access to the money without penalty.