Emergency fund question

[msmama]

What does "emergency" mean to you? How much of it would you use at any one time (if you had a choice)?

I have a fully stocked Emergency fund, but it's also my savings account (as I only keep 9-12 months income in it and move anything above that into "retirement" accounts, which I coud touch, in theory, but would rather not).

Had a horrible winter, my house needs to be resided (though I may be able to get away with repainting for another year or two but that could just be a waist of money) and I just found out that my backyard/pool area needs a bunch of work (some cosmetic, some necessary).

I'm having trouble prioritizing though. I could obviously put off some of the cosmetic issues in the yard, but overall I will probably end up spending more in the long run then (and double doing some work, perhaps)

To do everything I have to do (and want to do) would take just about the entire emergency fund and that makes me sick to my stomach. I do have access to a Home equity line so could take a loan out for all or part of the work, but I'm sure the interest rate on that would be higher than the interest I'm making.

What is the purpose of the "emergency fund?"

 

[worm761]

In my opinion an emergency fund is for need to do. Not a want to do. You use the money to do what needs to be done. Then you save the money back up and then do what you want to do with a different savings account.

We have an emergency savings and a regular savings. They are for different things.

 

[sweetdana]

What does "emergency" mean to you? How much of it would you use at any one time (if you had a choice)?

I have a fully stocked Emergency fund, but it's also my savings account (as I only keep 9-12 months income in it and move anything above that into "retirement" accounts, which I coud touch, in theory, but would rather not).

Had a horrible winter, my house needs to be resided (though I may be able to get away with repainting for another year or two but that could just be a waist of money) and I just found out that my backyard/pool area needs a bunch of work (some cosmetic, some necessary).

I'm having trouble prioritizing though. I could obviously put off some of the cosmetic issues in the yard, but overall I will probably end up spending more in the long run then (and double doing some work, perhaps)

To do everything I have to do (and want to do) would take just about the entire emergency fund and that makes me sick to my stomach. I do have access to a Home equity line so could take a loan out for all or part of the work, but I'm sure the interest rate on that would be higher than the interest I'm making.

What is the purpose of the "emergency fund?"

I would never use all. If you have 6 months in liquid, and nothing you see in near future, I would feel fine spending the rest,

I am not in the court if ever using an equity line for something that is not urgent.... But I sold mortgages for 8 yrs n watched peeps draw there equity out until there is nothing left. Then foreclose, and drown. It makes me over scared of anything financed. My perspective is what I've seen... And it scares me.

 

[lisaross]

i have 2 different emergency funds...

my touchable emergency funds - which i would use if a refrigerator broke or some type of appliance or medical emergency and i keep $2000 in it - if ihave to use it i try and replace asap.

I also have an emergency fund with about 7 months living expenses that i hope to never touch...its incase of a job loss or Medical emergency or something along those lines....

for upgrades i want to do in the home, i try to save for...

 

[dawnball]

I would use every penny if I -had- too, but the situation would have to be dire. Note that these situations are fabricated, but similar scenarios have been used in our emergency planning discussions. These are the routine, warm-up versions. Most of what we're really planning for is "The SF Bay Area was hit by the big one. We need to find short-term shelter, new jobs, new school, deal with significant injuries, replace all our possessions - and the insurance companies are so swamped that we don't expect to see a payout on our earthquake insurance for a very long time."

Emergency: The family car is totaled. The emergency fund covers paying for the rental car (with the expectation of being repaid by insurance - but needing to float the money.) The emergency fund might pay for secondary transportation (Our car was totaled, I'm in no shape to drive, so I called a taxi.)

Not emergency: My car is getting old and repairs are expensive, I want to get a new car.

Emergency: A tree falls on my house, ripping a giant hole in the roof and letting rain in. The emergency fund pays for a hotel room that night. It pays someone to come out immediately and both board up the hole and start water remediation because that's a lot cheaper than having a moldy house. It pays for dry clothes so my child can still go to school the next day, and some replacement toys.

Not Emergency: My kid left her window open when it was raining and her laptop got soaked.

Emergency: I lost my job, and don't have any other way to pay the mortgage.

Not Emergency: I could pay off my mortgage if I drained the emergency fund!

Emergency: While my husband is out of town, I require emergency hospitalization or surgery. The emergency fund gives the friend/family member I begged to keep my child carte blanche to take care of things and keep her as calm as possible. It also pays to put my husband on the next flight out of wherever he is.

Not Emergency: While my husband is out of town on a business trip, I have the flu. The emergency fund doesn't cover takeout soup from the chinese restaurant - no matter how much better it might make me feel.

Emergency: Serious earthquake.
Not Emergency: another crack from a little rumble

Our opinion is that if money solves an acute, unforeseeable problem, you can consider using the emergency fund - but common maintenance is foreseeable, and therefore not an emergency.

We do keep our emergency fund, checking and savings somewhat comingled. But that's because in a real emergency, I don't want to be futzing around with getting money out of an obscure account. I want some cash on hand, if that's not enough, I want available cash in the checking account I can access with my ATM card, if that's not enough, I want money I can sweep from savings into checking, if that's not enough, I want securities I can sell... Each layer deeper requires something more significant, with longer effects and more consideration that we're really making the best long-term decision we can.

If my house needed to be resided, I'd expect to have known about it for awhile, to be honest. Structural damage and rot takes time. You may be able to do a partial reside, or do a side of the house each year. Likewise, how urgent is the "needed" work outside? Is your pool leaking, and creating a sinkhole that your deck is about to fall into?

 

[LJSquishy]

It really depends on how urgent the repairs are. Needing to reside your house sounds like it's pretty urgent. I would focus on that first.

I personally would not drain your savings account unless 100% necessary. Maybe you can get the siding done by using half of the money in savings? I would try and leave 6 months salary in savings for now and build it back up as soon as you can. The pool/backyard area sounds like it's not quite as urgent as the siding on your house.

I'm not a fan at all of taking out a HELOC. They are dangerous. I always think about the "what if"....What if you take out a HELOC, do all of the repairs (using part of your savings but not all), and then lose your job? Clearly you are financially responsible since you have a nice savings account built up, but a lot of folks aren't as money savvy and don't think about the "what if's". I would avoid a HELOC at all costs if possible.

 

[runwad]

Like some other posters I don't think what you need done qualifies for using your emergency fund. I'd save up additionally for the work. I know the less painful way is to use the emergency fund.

I'd love to pay our house off and we have the money in our account, but draining it that much makes me nervous. The house will be paid off anyway in 3 years, that'll go by fast I keep telling myself. But it sure is tempting to just retire the thing. If only I had won the last power ball.

 

[Jeff_G]

Emergency fund is for an immediate urgent financial need that was not foreseen.
You should have a separate house repair fund for the bigger maintenance items.

Siding needing to be replaced is not an emergency, nor is the pool area work.

 

[gracie1]

I just keep a savings account which is considered emergency money. I don't touch it unless a true emergency, which is normally never, unless a huge car expense comes up, etc. I like to keep a years worth of mortgage in there, in case something unforeseen happened and I lost my job, I know that my mortgage is covered!! I can cancel cable, internet, etc., As long as I have a roof over my head and electric!!