Question for Savers/Emergency Account

[DawnM]

We have ours in a money market account. It is easily accessible, but not as accessible as running to the ATM. We would have to make an effort to get it in our hands, so that keeps us from touching it.

 

[DrummerBoy523]

love the safe concept (want to get one but still trying to figure out best type-the digital ones concern me, if you can make any suggestions I would appreciate it)

We have a First Alert, waterproof/fireproof. Got it at Costco. Around $300. Rated ~1700 degrees for 100 minutes and waterproof as well. Oh, and it is bolt-down which I liked. I have it bolted to the floor in our master bedroom closet. It aint goin anywhere LOL. And luckily I've never had to put it to the test

 

[gracie1]

Wow, guess I never thought about having cash on hand. We've never had a situation where debit/cc's wouldn't work or the bank wasn't open. Guess I need to fix that! Thanks!

I'm with you - I don't keep any cash on hand typically but now thinking maybe I should have a tiny emergency stash in the house!

 

[DrummerBoy523]

Not to hijack, but for the emergency fund pros... what do you do once you've hit your emergency? We had an unexpected period of unemployment and blew through the bulk of our emergency fund and now are trying to build it back but our income is much lower than previously so we're struggling getting ahead with it. We don't have any debt other than our mortgage and car, and are paying our bills and putting money towards retirement but the emergency fund is slow to rebound. Do you treat it like a debt to tackle and cut things out until you can beef it back up?

Hi, personally, I would stop putting money towards retirement and try to pinch a few pennies until you get a liquid emergency fund in place, and then resume your retirement. Why? What happens if something happens (again, in your case) before you retire? You need something liquid.

Also - if you don't have a budget, get on a written budget and put your EF into it. I've made the mistake of waiting until I have a surplus before saving and usually that means no surplus LOL.

 

[tvguy]

I'm with you - I don't keep any cash on hand typically but now thinking maybe I should have a tiny emergency stash in the house!

I have to have cash around, the cheapest gas stations here are cash or debit only (with a 45 cent fee, I'm NEVER going to pay that) and of course places like the Saturday farmers market are cash only too.

 

[AquamarineSteph]

Of course, it bothers me, but the point of having emergency cash is to have it liquid enough that you can grab it when you need it. Whether that means a low earning savings account or cash in a box buried in the backyard, there's a trade off for having ready cash.

 

[luvsJack]

Anyone that takes Visa, or Mastercard will still have an imprint machine.
80% of your credit cards? How many do you have? I have one.

I am surprised anyone was able to use a credit card after Rita since she was only a month or so after Katrina and there was a wide, wide area where there were NO cards used for a couple of weeks after Katrina. We take Visa and Mastercard and we don't have an imprint machine. In the last few businesses my parents had, there were no imprint machines.



Katrina taught us the lesson that CASH really does mean CASH. Not debit, not credit, but CASH. We couldn't buy anything for days until dh's boss got in to the office and paid all his drives in cash. Thank goodness he had the foresight to get that much cash out before the storm hit. It was a couple of weeks before you could really depend on being able to use your debit card again. Now there is enough money to at least pay for a couple of nights in a hotel room, tank of gas for the car and food for a couple of days in cash, in the house. The rest in a simple savings account.

 

[tvguy]

I am surprised anyone was able to use a credit card after Rita since she was only a month or so after Katrina and there was a wide, wide area where there were NO cards used for a couple of weeks after Katrina. We take Visa and Mastercard and we don't have an imprint machine. In the last few businesses my parents had, there were no imprint machines.



Katrina taught us the lesson that CASH really does mean CASH. Not debit, not credit, but CASH. We couldn't buy anything for days until dh's boss got in to the office and paid all his drives in cash. Thank goodness he had the foresight to get that much cash out before the storm hit. It was a couple of weeks before you could really depend on being able to use your debit card again. Now there is enough money to at least pay for a couple of nights in a hotel room, tank of gas for the car and food for a couple of days in cash, in the house. The rest in a simple savings account.

Small town where the merchants knew their regular customers well. They are big cash people too.

 

[luvsJack]

Small town where the merchants knew their regular customers well. They are big cash people too.

Small town here too. One of the merchants was a man who had a little country store and sold every single item in the store within a day or two. But it had to be cash. He couldn't be sure he would get his money at all if they used debit or credit. For some he would take a check but not everyone.

 

[kymom99]

I have to have cash around, the cheapest gas stations here are cash or debit only (with a 45 cent fee, I'm NEVER going to pay that) and of course places like the Saturday farmers market are cash only too.

Our local Dari Bar is cash only too!

 

[Scubee]

I had to take a deep breath after reading this thread. Lots of things I'd like to reply to, but I'll stick to the OPs post.

Yes. It sucks having money sitting in an account earning virtually nothing. But I'll tell you what I tell almost all of my clients: If you need that money within the next 18-24 months, then do NOT invest it. For those that watched their account balances tumble in the most recent market downturns of 2002 and 2008, they can attest to how long it took their balances to return to pre-downturn levels. An emergency fund is just for that - emergencies...unforeseeable expenses to you and your family. If it's invested, and you experience a market downturn when you need the money, you will have to pull dollars out of the market at the most inopportune time.

For many people, they access the account for so-called emergencies. Take for example the tires on your car. You KNOW those tires aren't going to last forever. They eventually have to be replaced. So you should be setting aside in your monthly budget an amount to cover that eventual, known expense. If you expect to spend $700 on a set of installed tires and you expect them to last three years, then you set aside about $20 a month in a non-emergency fund account. We call it the "pot" account. Some call it a periodic account. Another perfect example is auto insurance. Many people pay it semi-annually. That's NOT an emergency. If it costs you $600 twice a year, then you set aside $100 per month to cover the eventual cost. This type of planning can be applied to all kinds of expenses: insurance, auto tag renewal, holiday gift giving, annual celebrations, or any other one or twice per year expense.

My emergency fund consists of $1,000 cash in a safe at home and 3+ months of after-tax expenses in a money market account. Nothing less unless I have to access it. I've used it twice in my entire adult life.

 

[tvguy]

Small town here too. One of the merchants was a man who had a little country store and sold every single item in the store within a day or two. But it had to be cash. He couldn't be sure he would get his money at all if they used debit or credit. For some he would take a check but not everyone.

For many people, they access the account for so-called emergencies. Take for example the tires on your car. You KNOW those tires aren't going to last forever. They eventually have to be replaced. So you should be setting aside in your monthly budget an amount to cover that eventual, known expense. If you expect to spend $700 on a set of installed tires and you expect them to last three years, then you set aside about $20 a month in a non-emergency fund account. We call it the "pot" account. Some call it a periodic account. Another perfect example is auto insurance. Many people pay it semi-annually. That's NOT an emergency. If it costs you $600 twice a year, then you set aside $100 per month to cover the eventual cost. This type of planning can be applied to all kinds of expenses: insurance, auto tag renewal, holiday gift giving, annual celebrations, or any other one or twice per year expense.

Well put.
I would add, the number of years you own a car free and clear should be at least twice as long as the years it took you to pay it off.

 

[Sagginit]

I have an ER fund with capital one, it was formerly ING and had a decent interest rate years ago when I started it. I also keep about $1000 in a savings account linked to my checking with the same bank that can be moved in seconds for small ER (I typically keep at least $2000 in my checking). This is something I'm currently debating with my husband. We have decided to rent for at least 6-12 more months before buying, so we can save more for a down payment. We don't want to risk the money but we don't want to collect nothing on it as this amount of money has grown to a considerable amount. He did open up a money market or mutual fund account I believe but quickly discovered that with volatile markets this year its not a good place to put all our funds. He works in IT for a large bank so he also is restricted in what we can invest in (no stocks for example) as he is considered to have insider knowledge or could have or something like.

My ER fund was always a few months of expenses plus car repair costs as I drive older used cars. The battery went and we paid AAA about $130 to replace it and check our car engine for us this weekend (amazing service right in our driveway so that paid for the membership cost this year ). My husband was like well that was unexpected but I reminded him that what we save in car payments is really part of what we put into our ER savings each month. He has never owned a car before since he always lived in NYC so he didn't think about it that way. I feel these type of expenses are less bothersome when you plan for them and include it in your budget as you did technically set aside the money for that such incident rather than feel like you "had to dip into savings".

We rent so keeping a lot of cash on hand in our apartment just doesn't make sense as we have no where to securely bolt a safe and an ER in the other units (such as fire or flood) would affect us too, potentially locking us out of our savings. If I owned a house I would totally get a safe to keep in the garage bolted down with some money in it. Most of my family/friends that live in the suburbs in houses do keep cash on hand in safes.