How much efund is too much to keep in cash?

[y4m]

What is your rule of thumb for how much of your efund or other savings you keep in accessible cash (eg ING or even CDs) vs investments? Do you just keep the rest in an index fund, or are you more aggressive with it?

I suspect I have too much in cash right now and I need a push to move it.

[FWP]

This is hard to answer. I can tell you what we do and why but I'm not sure it'd be applicable to you. I don't like to see more than 25k in cash if you don't have plans for it in the next couple of years.

Is it strictly e-fund or is it car fund, house fund, etc?

In terms of where to put it, yes we do index funds. Which type of index fund depends on how much you have.

[barefootcontessa]

We keep about $10K (which covers a month's expenses) in an interest-bearing money account. I have more money in a taxable investment account that is also earmarked for emergencies, etc. I am an active trader, however, and check on the accounts multiple times per day.

[aurora]

Well, we had a ton in cash recently, but that's because we bought a house and didn't want to trust our down payment to market fluctuations. The cash portion of our e-fund that remains is about 4 months of our expenses, and we'll be gradually adding cash for the new vehicle we plan to buy in ~4 years. The rest of our e-fund is in investments (a variety of stocks/bonds/mutual funds). It's quite possible that 4 months is too much to have in cash, but I'm somewhat risk-averse when it comes to the e-fund. This is actually kind of strange since I'm not generally risk-averse when it comes to our overall portfolio. However, when it comes to our market investments I don't really differentiate where the e-fund ends and the rest of the portfolio begins, if that makes sense.

[bostonmichelle]

I have $10k in a savings account right now which is about 2.5 months of expenses. Once I pay off more debt and I get to about $20k I'm going to open up a fidelity/vanguard account and put $10k in there and keep $10k in my savings account. Both our jobs are very secure and once we pay off SL's, cars, etc we can pretty much live on one income. I also don't want to keep a lot in cash that I could be earning more money on elsewhere.

[Susie]

For us, right now, I like to keep total cash in the $20k-$30k range. Over $30k is too much cash for me. But that number could change considerably based on the overall lifestyle cost (and therefore how deep pockets would need to be to cover it in an emergency), risk exposure, etc.

[ladygrey]

DH and I are constantly debating about how much to keep in cash - he is a cash hoarder and I would rather see excess money moved into investments. Currently we have over a year's worth of income sitting in our checking account and it's driving me crazy. DH is resistant to moving it, due to the advice from his friend who works in finance who says that "cash is the best place to be right now." Grr...

[y4m]

This is efund and then additional savings outside of retirement. Not earmarked for anything specific at this time.

[awkwardpenguin]

We keep around $15k in cash. The rest of our efund is mixed in with our general taxable investments, but I'm thinking I might move to a similar strategy used by Betterment, and stick some of our e-fund/investments in Treasury Bond ETFs. Probably not this week.

[AAM2012]

What I would recommend and what I actually do are completely different. I am a cash hoarder and can't seem to get past that to invest it.

[Deleted]

About $5k, our monthly fixed expenses are about $1500 without groceries and gas, we have no children, and we're renters. We could easily pull out some investments within 3 business days.

[Deleted]

$20k absolute max. Our expenses are about $5k/mo (less if we eliminated Roths, etc) take home around $6k/mo.

[jene]

$15-20k

[winemaker06]

All these responses make me realize that I'm probably too conservative.

I have a $10k cash EFund (then another $20k in mutual funds).

House savings goes from $5-10k depending on how recently we spent it down on the latest piece of major maintenance.

There is $15-20k in cash for hopefully paying for our next car in cash. Since that will be within the next 5 years, the market doesn't seem like a smart idea.

Then $8k for new baby savings and another $5k for 2013 taxes because we know we will owe. Then we are also saving monthly for 2014 Roth IRAs (2013 already funded), which will be $11k to disappear in early January.

Maybe I plan too much... :-) Next we have to start beefing up downpayment savings, so that will be even more ridiculous.

[Deleted]

We do $20,000 - $30,000. Most of the time it is too much, but when (like the past 3 months or so) our expenses are super high because we've gotten the credit card bills from a vacation or what-have-you, it is about right.

[mlvmd]

We keep around $5k-7k in cash. This furlough is a good test of my various holding strategies as our cash will have to float us while I don't get a paycheck and I make almost 2/3 of our income. We keep some in an easily accessible mutual fund and some elsewhere. I just hate to have cash sitting doing nothing for me.

[bunch]

We do 10k, which is 3 mos expenses for us.

[cowboyjoe]

Here is our current breakdown. I am pretty cash adverse.

Checking/Savings - $3,000
CD Ladder - $7,500
Conservative Mutual Fund - $7500

Everything else is in higher risk mutual funds, ETFs, and individual stocks.

[M]

We keep 12 months of expenses just sitting in a money market account. Any more gets moved to investment accounts. Our situation is different though because about 95% of our income is variable.

ETA: Once our cash goes to an investment account, it stays there. We have automated trading strategies in these accounts that perform based on stats and it's a PITA to play guessing games on when to restart the strategy so we just don't mess with them.  The only time we might touch any account is if we plan to make a large purchase and besides buying a house (not happening anytime soon), there's nothing I can think of that our efund can't cover.

[Deleted]

We only have about 10 K in an ING savings account. It is basically one month's expenses. We really have no need for more as we can access our investment accounts within a few days if need be and we have credit cards with high limits. I really can't come up with a realistic scenario where what we have wouldn't be enough.

[cosmos]

Well now we have a lot in cash because of our DP but before we kept $10kish in cash.

[kadams767]

Currently, I am comfortable with $10k as efund only. It is in an ING savings account. This would cover 3-4 months of pared down expenses if we had no other income source. I am kind of neurotic about it, and I don't mix any other savings with the $10k efund, though. We usually have additional savings in another account, depending on what we are saving for and what bigger expenses are coming up. For example, right now we have about $3000 in savings that is earmarked for some home improvements and decorating, $2000 to pay taxes in December, and $5500 that will go into my IRA this month.

Anything beyond these amounts gets invested. We have a mix of ETFs, higher risk mutual funds and some individual stocks that are outside of our traditional retirement accounts. In a true emergency situation, we'd pull money from these investments after depleting the $10k and other savings account.

[iheartbanjos]

We keep a $30k Efund in ING and around $10k in our bank savings. That's 4-6 months expenses depending on daycare.

[Deleted]

Oct 8, 2013 17:30:38 GMT -5 @msstarry said:

I swear I heard for higher net worth individuals no more than 15% net worth. I can't figure out where I heard this though. Right now we are around 10% (mainly because the market has had such a great year and our non-cash investments have grown).

Holy crap, 15%?!? For us that would be close to 4x what we currently have.

I can not imagine if I had a $1MM net worth (which I do not), having $150k in cash/equivalents.

[SJ]

Oct 8, 2013 19:07:19 GMT -5 @arya said:

We only have about 10 K in an ING savings account. It is basically one month's expenses. We really have no need for more as we can access our investment accounts within a few days if need be and we have credit cards with high limits. I really can't come up with a realistic scenario where what we have wouldn't be enough.

Same. ING/Capital One has just under $10K. I have a taxable investment account at Sharebuilder so I could easily move things between the two. I also often have cash in the investment account depending on market swings or limits.

ETA: Sorry, that is not a "rule of thumb" - it's just what we do. In the current interest rate environment, I certainly wouldn't want to be stockpiling lots of cash earning 0% if:

1) You have high interest debt 
2) You are not taking advantage of the retirement options available to you
3) There is no short/medium-term "need" for the cash

[niq]

Three months' emergency expenses (exclude DC, college savings, mom's living expenses), which is about $18-20k. Everything after that sits in a fund of index funds which covers bond, large cap, mid/small cap, and I think some international equities too.

It's not optimal ... there is some tax planning guideline about which investments should be in tax favored accounts versus taxable accounts that I haven't done anything about.

Typo + Swype = Swypo

[crashgizmo]

We definitely differ on this- DH is much less of a cash hoarder than me.

Right now we have about $40K in savings and $10K in checking, which is 9ish months of expenses. I keep the 10K as slush and don't touch the savings unless it's a true emergency.

[ewall]

I tend to keep a generous efund in ING/Cap One. 4 to 6 months of expenses. Then an additional 2 months or so in checking. We use YNAB so we always have minimum 1 month buffer in checking.

Once we have met out IRA contributions for the year, I tend to throw a little more at our efund.

[delawarejen]

When I first saw the headline, I thought you meant cash as in how much of the green stuff do you keep in your house

I keep 10K (which is 7 months of expenses) in a savings account, as well as a few thousand in sinking funds that I could tap as well. After I save for retirement, I don't have a lot of extra money available. Until I have flush sinking funds, I don't want to invest any of it. The highest my cash savings has gotten was the 30K range, but that was when I was making a lot more money and saving for home renovations.

[SJ]

Oct 9, 2013 7:31:39 GMT -5 @lcap said:

Now that we might be looking at a huge market pull back, I'm not so displeased that DH insists on such a large cash position

As long as he uses any "huge market pull back" to put that cash to work!