What is a fully funded emergency fund to you?

[MrsE]

We are overly conservative with our finances and keep one year’s worth of expenses (mortgage, daycare, bills, etc.) in a cash savings account. Would it do better in the market? Most likely, but does it make us feel much more comfortable in our vhcol area? Yes.

[lolalolalola]

Sept 12, 2019 10:34:15 GMT -5 Covergirl82 said:

Sept 11, 2019 12:30:03 GMT -5 lolalolalola said:

We have never had a separate emergency fund, I want my money to "work for me". We are lucky enough that we have always had access to other forms of funds if we were ever in an emergency - home equity, unsecured lines of credit, investment accounts, and credit cards. I know this isn't an option for everyone.

I agree that there are other options, but, IMO, cash is easiest and most accessible when a job is lost.  I would worry about being able to be approved for a loan or line of credit in the event income is lost.  (Our credit union made it seem near impossible for us to get a home equity loan to buy a vacant piece of property, and we ended up having to go through a bank.)  I would also worry about the additional cost of interest with a line of credit, as the interest rates are often variable (such as a HELOC).  A cash e-fund is my number one source for emergency income replacement, with credit cards and/or a hardship withdrawal from retirement savings as back-up/last-ditch options.

I agree that cash is easiest and most accessible. I am comfortable without the easiest and most accessible option for a low probability event. The investment income I'm earning on the equivalent of 6 months of expenses over the course of my lifetime outweighs the potential extra interest costs or transaction fees I would incur if I had to borrow money until I could pull out of my investment accounts.  As I mentioned above, this isn't an option for everyone- we are lucky that it's a viable option for us.

[sandandsea]

I have a specific dollar amount in mind. Ours would cover 6 months of normal living expenses without changing anything. That way it could cover longer than 6 months and give us time to re-evaluate.

[dochas]

Sept 11, 2019 14:51:50 GMT -5 sadlebred said:

What about those of you who are single or have only one income? What about your emergency funds? I know it's unlikely that a dual income household will have both jobs lost at the same time.

We have 1 income. I'm uncomfortable with less than 10,000. It has been a struggle to stay at that number a lot of years. When it's above, I'm happier. When it's below, it's a goal/worry. I'm not sure exactly how many months that would be. I also put money aside every month for irregular expenses, so if income were to stop for a while, have money saved for future insurance, r/e taxes, etc. We own two homes so it isn't just a fund for job loss. We have a HELOC we can use for emergency home stuff, but for years we had very little "extra" money, so using the HELOC wasn't a desirable option because it would be hard/impossible to pay it off. I'm working part time now, so have separated out other savings. I have a new car fund, vacation fund, so the emergency fund is becoming a true emergency fund.

I think the best answer is "as much as you can do". Money and savings have a huge mental component. Often, if people think they should have 6 months because everyone says they should, they won't see any point in trying to get to 2 months. 

[brooke77]

We keep 3 months of living expenses (mortgage, daycare, student loans, car loans, food, etc). We do not both expect to lose our jobs at the same time, so we are comfortable with 3 months. We can live off one income with adjustments and depending who loses their job and the unemployment benefits we get.

When I was single, I was more conservative. I kept 6 months living expenses (mortgage, student loans, food, etc).

[woowoo]

3 months living expenses for us. We both make about the same base salary (my bonus potential is significantly higher) but could easily live off of either salary if needed.

[tigress]

I go with 3 months expenses. I have other assets I could get to as needed and figure 3 months would give me time to figure that out. Additionally it is unlikely we would suddenly have $0 income coming in at all (H has a side business and we have 3+ rental properties and I sometimes have a side job and we both work full time, plus unemployment if that happened) so it would be able to stretch for longer than that.

[mommin]

I am a sahm with four kids so I tend to be more conservative as well. We keep a year of bare bones expenses in a savings account. I want to be able to access it when I need it so I don't put it in the market at all. I know it would be difficult for me to find work after so many years out of the work force so I feel more comfortable with a larger emergency fund. DH receiving unemployment or disability would extend the life of our savings which is also a bit of comfort that I keep in my back pocket.

[numbers]

6 months of expenses in cash.

12 months of expenses in cash is my personal "helps me sleep better at night" number.

[meltoine]

We keep 2 months in cash. We have another 3-4 months in DH's employee stock purchase plan account, which he keeps pretty conservatively invested. As it grow beyond the 3-4 months the extra becomes our slush fund for vacations and house projects. We're back at the 3-4 months right now because we just had our driveway redone.

[mrsukyankee]

We have had what is called an offset mortgage (not available to you in the US). What that means is that our mortgage is linked to our savings account. The value of your savings is deducted from the amount you pay interest on, which lowers your monthly payments. With an offset mortgage, you will not earn interest on your savings but for us it worked out. It then made sense to have a year's savings as it was doing some good work. We probably could have paid off our mortgage earlier than we did but it didn't make any sense to do so as we weren't paying any interest on it.

So, my answer is a year's worth. We are also quite a lot older than some on this board so no longer have student loans and we don't have kids. We gave up a lot for a few years to get to this point.

[Deleted]

I feel like an MM failure. I'm paying down debt currently and am not into savings mode. I can go one month without a paycheck and then I would be screwed. I could go two months with paying rent in cash and rack up some nice credit card debt.
Now if I quit my job or something, I get almost 5k cash out on my vacation days. that would keep me afloat to leave my current apartment and move in with a friend and live for a few stressful months without a job. I do have a side gig that I could easily make 2-3k a month at if my main job went south. I also have four months of sick leave saved up so if something semi bad happened then I could handle it.

I would be way more comfortable in my life if I had 3 months of savings stocked away and another 3 months in short term investments. My job is pretty stable. They only way my company would get rid of me is if I quit.

[msmerymac]

Mine isn't defined by months of living expenses. I have separate savings for various categories - car, home, kid, pet, sinking funds, vacation. When all of those are fully funded (car, home, and vacation have minimums to be "fully funded" but can also depend on specific goals), I guess they equal out to about 6-7 months of basic expenses in cash. More if we're close to buying a new car or pulling the trigger on a house project or something. Anyway, I like the system because it's easy to save towards goals instead of having just one pile of cash, and it's easy to see where the money will come from for, say, an emergency vet bill or car repair, when needed.

[illgetthere]

Sept 11, 2019 14:51:50 GMT -5 sadlebred said:

What about those of you who are single or have only one income? What about your emergency funds? I know it's unlikely that a dual income household will have both jobs lost at the same time.

Single with Kids. Fully funded for me would be 12 months bare bones less unemployment compensation. That is about the same as 6-7 months reduced but semi normal expenses, so 6 months per the poll