Emergency Fund

[MarkBarbieri]

How much do you think is a reasonable amount of money to have in an emergency fund? Has your opinion changed as a result of the recent economic difficulties?

Before we had kids, I was comfortable with 3 months expenses. When we had kids, I upped it to 6 months expenses. Now, after hearing so many stories of protracted unemployment, I don't think 6 months is a comfortable cushion. I think I'd feel a lot better with 12 months.

 

[*pixie*dust*]

I am working towards 8 months. I should hit that in about 2 more months.

 

[floridaminnie]

Of course, the more the better.

 

[JessicaR]

How much do you think is a reasonable amount of money to have in an emergency fund? Has your opinion changed as a result of the recent economic difficulties?

Before we had kids, I was comfortable with 3 months expenses. When we had kids, I upped it to 6 months expenses. Now, after hearing so many stories of protracted unemployment, I don't think 6 months is a comfortable cushion. I think I'd feel a lot better with 12 months.

I guess the amount would be different for everyone. Also, fund meaning in a bank? Emergency to me equals tangible. It increases daily.

 

[MarkBarbieri]

I guess the amount would be different for everyone. Also, fund meaning in a bank? Emergency to me equals tangible. It increases daily.

To me, emergency funds are reasonably liquid funds in low risk investments - money in savings accounts, short term CDs, money market funds, even short term bond funds. I wouldn't consider money in risky investments like stocks or illiquid investments like real estate to be emergency money.

I look at emergency money as the funds I would be able to tap quickly in a medical emergency, use to cover a period of unemployment, use for car repairs, etc.

For me personally, I have my emergency funds tiered with some in a savings account to use for quick cash flow problems, more in a money market fund to be drawn on for bigger emergencies, and more in a short term bond fund.

 

[JessicaR]

To me, emergency funds are reasonably liquid funds in low risk investments - money in savings accounts, short term CDs, money market funds, even short term bond funds. I wouldn't consider money in risky investments like stocks or illiquid investments like real estate to be emergency money.

I look at emergency money as the funds I would be able to tap quickly in a medical emergency, use to cover a period of unemployment, use for car repairs, etc.

For me personally, I have my emergency funds tiered with some in a savings account to use for quick cash flow problems, more in a money market fund to be drawn on for bigger emergencies, and more in a short term bond fund.

Emergency and reasonable aren't used in the same sentence for me.

I understand funds, accounts, bonds but in a true emergency I cant get at those. Thats all I was saying. To me those are all great to have for the future in a non-emergency. I guess the definition of emergency differs.

 

[WDWBarb]

Ideally, 8-12 months of expenses.

 

[golfgal]

I would say at least a year but also quantify that by including money market accounts, mutual funds, cash value in life insurance or really any funds you can access without penalty (not taxes, extra penalties on top of taxes). Just to have in a "savings" account, no more than 3 months since the interest rates are so horrible.

 

[wdwfan16]

Do to the kind of jobs that DH and I have we have always kept a year (including two unemployments) in our emergency fund.

 

[disney1990]

Do to the kind of jobs that DH and I have we have always kept a year (including two unemployments) in our emergency fund.

Considering I just went back to work in May after being unemployed for 15 months -- I would say a minimum of a year.

Thankfully, unemployment carried me through me 15 months and I didn't have to spend any of my emergency funds.

 

[MarriedToAPrince]

When all is said and done ours will have 12+ months of covered expenses. I cannot wait to hit that number!

 

[C.Ann]

Every dime I can possibly put away - seriously.. I allow myself a very small amount to "squander" (buy used books and such) each month, but other than that I really try to save like crazy.. Worst part is, I'm okay money wise as it is (savings), but you never know when that can change in a heartbeat..

If I were younger - and had a family - I would definitely shoot for the 12 months - if at all possible..

 

[MarriedToAPrince]

Emergency and reasonable aren't used in the same sentence for me.

I understand funds, accounts, bonds but in a true emergency I cant get at those. Thats all I was saying. To me those are all great to have for the future in a non-emergency. I guess the definition of emergency differs.

I think I am like you....to me an emergency fund it a set up account with a set amount of funds for emergencies and doesn't include a regular savings or mutual funds or retirement, just plan savings for emergencies.

 

[laurie31]

Emergency and reasonable aren't used in the same sentence for me.

I understand funds, accounts, bonds but in a true emergency I cant get at those. Thats all I was saying. To me those are all great to have for the future in a non-emergency. I guess the definition of emergency differs.

Could you elaborate? In what type of situation where your income was interrupted (whether from job loss or injury/illness) would you not be able to use your savings to pay your bills?

I understand things like CDs or bonds would have to be cashed in, but even so, they CAN be accessed with a penalty. Even your 401K could be accessed in a dire emergency. (well, it would have to be dire for me personally to touch that - but if I were out of work for a year and risked losing my house, then yes, I'd cash in the 401K).

 

[golfgal]

Considering I just went back to work in May after being unemployed for 15 months -- I would say a minimum of a year.

Thankfully, unemployment carried me through me 15 months and I didn't have to spend any of my emergency funds.

Just curious how unemployment works in your state. Here you can't really live on unemployment, it is a percentage of your salary but with an overall cap. I think it is something like 25% but the cap is $588/week. I know in our house that wouldn't begin to cover bills, house payment, etc.

 

[barkley]

at rock bottom, bare minimum-amounts equivilent to the deductables on our homeowners, auto, and idealy each family member's yearly health insurance.

i think it's difficult to anticipate how much "monthly expenses" may be in the event of an emergency, depending on the kind of emergency. in our case we've seen expenses go down (unemploment that created reduced income, but lowered expenses due to commute costs and elimination of childcare), and increase (unemployment due to illness that created reduced income, but still required childcare, and increased expenses due to medical costs not met by insurance). and-in the case of being evacuated from our home due to a roof collapse a couple of years ago, a major short term increase in expenses (deductable for insurance company, temporary housing-months down the line reimbursed by insurance company-, food that could be prepared with only a motel bar fridge, and a microwave, toiletries, "enough to get by till we are allowed back in the house to retrieve" meds, clothing, toiletries, school supplies..., transportation to get kids to school (cuz lodging is'nt in same school district as home), replacement food for stuff that went to spoilage while we were out of the house....

it added up FAST, and while insurance reimbursed for lodging and a portion of meals-it takes awhile for that to get issued.

 

[kamik86]

Honestly I have about 5000 and feel comfortable with that. Even if I lost my job (and I make the FAR majority of the income in our relationship) I can't see needing much more then that and hate leaving it designated as an emergency fund instead of doing something with it. (retirement funds, paying off student loans, etc).

I mean I would have unemployment and still have hubby's check. We could cut down expenses so its not like we would be living entirely off savings. So your 6 months of expenses would probably go the entire year you can get unemployment easily, possibily longer.

Then again I work at a business that is having trouble finding all the people they need.

 

[Explodo]

We recently upped ours from 6 months to 10 months.

And this time last year both my wife and myself were laid off on the same day....the emergency fund kept us solvent with no worries until I got a Yob 2 months later. Thank god we had that savings.

 

[golfgal]

Honestly I have about 5000 and feel comfortable with that. Even if I lost my job (and I make the FAR majority of the income in our relationship) I can't see needing much more then that and hate leaving it designated as an emergency fund instead of doing something with it. (retirement funds, paying off student loans, etc).

I mean I would have unemployment and still have hubby's check. We could cut down expenses so its not like we would be living entirely off savings. So your 6 months of expenses would probably go the entire year you can get unemployment easily, possibily longer.

Then again I work at a business that is having trouble finding all the people they need.

You can still invest your emergency fund in mutual funds, just don't put it in a tax sheltered account like an IRA where there are penalties for taking the money out early. Quite honestly, $5000 wouldn't even cover one month at our house. You can also only cut back so much, you still have a mortgage to pay, light bills, groceries, etc. Sure you can cut out a few hundred for internet and cable but not having internet sure makes finding a job pretty difficult. You also have to plan for BOTH of you being unemployed, not just one person. Your 6 months of expenses is just that 6 months. It might not be the same number that you spend now but you should plan on having AT LEAST 6 months in realistic expenses-knowing that things break, cars need repairs, etc.

 

[JessicaR]

Could you elaborate? In what type of situation where your income was interrupted (whether from job loss or injury/illness) would you not be able to use your savings to pay your bills?

I understand things like CDs or bonds would have to be cashed in, but even so, they CAN be accessed with a penalty. Even your 401K could be accessed in a dire emergency. (well, it would have to be dire for me personally to touch that - but if I were out of work for a year and risked losing my house, then yes, I'd cash in the 401K).

I interpreted emergency to be an emergency - an urgent need for assistance or relief. I was thinking more along the lines of a true emergency where banks would be useless - tangible cash.

Losing a job is advanced planning for the unforeseen future. I took the word emergency to its extreme.

I worry about things most people don't.