Emergency Fund options

[Rasputin]

I have a Roth IRA, and ally online savings account, a small amount in savings account linked to my checking, and an individual taxable account with vanguard that holds some shares of VTI. Can one use the taxable brokerage account for their emergency fund?
Thanks.

[GizmoTX]

The problem with using an investment in a brokerage account is that it can lose value just when you need it and even if it hasn’t, selling it is a taxable event.

I use an online savings account for emergency funds, linked to a checking account for easy transfer.

[Rasputin]

The problem with using an investment in a brokerage account is that it can lose value just when you need it and even if it hasn’t, selling it is a taxable event.

I use an online savings account for emergency funds, linked to a checking account for easy transfer.

That’s pretty much how mine is set up. I have a little over $1,000 in my savings account I can access immediately, then the rest is in my ally account. That money takes a few days to get out. I was just wondering if anyone did anything different.

[GizmoTX]

If you can utilize a credit card for emergencies, then a few days to transfer funds shouldn't be a problem. We don't have a bank savings account because it doesn't pay anything, but do get a little interest on our Schwab checking account.

[seemsright]

A $1,000 in a Emergency fund is NOT enough! That is not even enough in a 'oh shit fund'

is a $1,000 better than nothing YES! But it is not enough.

Shit can happen. Emergency dental work even with kick ass insurance cost me $3,000 last year.

This year I broke my foot. I have all ready spent $500 trying to get it worked on and I do not even have the Dr bill yet. I know I will have my insurance deductible at $300 and that is a total of $800 all ready out the door and that is not the cost of a new pair of shoes.

Then there is the cost of owning a house...every time something goes wrong it is big bucks. The kitchen rains, the roof needs to be replaced after a wind storm.

You can plan for some things but not for most. And if you have kids the 'oh shit fund' needs to be even higher.

Where you keep it is up to you all you need to remember is you do not want it to cost you money to take it out of that account. 

[CanuckExpat]

To properly answer need a better picture of your total overall financial picture, size of savings, income, spending, etc.

Take a look at these articles and see if helpful btw:
https://www.bogleheads.org/wiki/Placing_cash_needs_in_a_tax-advantaged_account
https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund
https://www.mymoneyblog.com/should-you-keep-your-emergency-fund-in-your-401k.html

[SteadyDoinIt]

Money market maybe? Earns more than a regular savings account, but to my understanding is super liquid. We are thinking of transferring our savings account to a money market, so can somebody please confirm that train of thought?

[Telecaster]

I have a Roth IRA, and ally online savings account, a small amount in savings account linked to my checking, and an individual taxable account with vanguard that holds some shares of VTI. Can one use the taxable brokerage account for their emergency fund?
Thanks.

You can, and I do.   What  GizmoTX said is true, but the main risks come early on when you don't have a lot of money.   If there is a market drop, and you need the money there might not be enough available.   Thing is, emergencies are rare by definition.  As long as you have sufficient investments in the taxable account such that you can handle a emergency ("sufficient" is in the eye of the beholder) plus some reasonable buffer in the event of a market drop then you're fine.   And market drops aren't all that common either.

Having a big wad cash set aside for an emergency buys security, but it is expensive security.   What buys more security than a big stack of cash is a bigger stack of stocks that could be liquidated if necessary.   For obvious reasons, eventually stocks will outgrow the cash.   There is sort of an awkward period when you don't have a lot of money, and need the security of at least some cash, but goes goes away as you keep contributing to the fund. 

[therethere]

A $1,000 in a Emergency fund is NOT enough! That is not even enough in a 'oh shit fund'

is a $1,000 better than nothing YES! But it is not enough.

Shit can happen. Emergency dental work even with kick ass insurance cost me $3,000 last year.

This year I broke my foot. I have all ready spent $500 trying to get it worked on and I do not even have the Dr bill yet. I know I will have my insurance deductible at $300 and that is a total of $800 all ready out the door and that is not the cost of a new pair of shoes.

Then there is the cost of owning a house...every time something goes wrong it is big bucks. The kitchen rains, the roof needs to be replaced after a wind storm.

You can plan for some things but not for most. And if you have kids the 'oh shit fund' needs to be even higher.

Where you keep it is up to you all you need to remember is you do not want it to cost you money to take it out of that account.

I would argue the size of the emergency fund should take into account what you are at risk of and also consider the opportunity cost of keeping the money available. In some cases $1,000 could be plenty of an emergency fund. I had a 1k emergency fund for 10+ years while I had high interest student loans. I rented, saved monthly for car maintenance, had an HSA, and a DINK household. so my risk overall was low and the opportunity cost of keeping money on hand was high (the rate of my highest debt 9%). OP did not specify enough about their life to really determine how much and where to keep it.

[Saving in Austin]

I moved my emergency fund from Barclays online savings (2.2%) to VMMXX in my taxable Vanguard account (2.46%) .

Vanguard's money market fund seems a safe as any bank to me.

Vanguard seems to realize it is for an emergency fund and there is a special "bank transfer" link that says it only takes 2 days to transfer. About the same amount of time as Barclays.

[pdxvandal]

Doing the same thing with Vanguard MM account after getting 3% interest on credit-union account the past 5 years ... but that required 10 debit card transactions and an ACH transfer. Got tired of playing that game for not much more gain. Have 3k in there and another 6k or so in a boring national bank account.

I moved my emergency fund from Barclays online savings (2.2%) to VMMXX in my taxable Vanguard account (2.46%) .

Vanguard's money market fund seems a safe as any bank to me.

Vanguard seems to realize it is for an emergency fund and there is a special "bank transfer" link that says it only takes 2 days to transfer. About the same amount of time as Barclays.

[Kayad]

Early retirement now (https://earlyretirementnow.com/2018/04/18/emergency-fund-in-stocks/) makes in depth argument for considering investment accounts to be your EF.  The cliff notes version: The reward of keeping your money invested significantly outweighs the risk of having to liquidate some fraction of your investment account at a less than ideal time.  This convinced me to keep a lot less money in a savings account.  I opened up a relatively low-interest HELOC to tap if I have some sort of short term cash crunch, and I will sell some stocks if a serious disaster hits. 

What others have said is right though:  This presumes an investment account that is many times larger than any likely emergency expense.  If you literally have just a few shares of vtsax, you can’t take the risk of an emergency that occurs during a market downturn.  Keep a cash EF until you have at least 20 or 30k in investment accounts.