Author Topic: Mini case study - Size of Emergency Fund  (Read 1857 times)

moonpalace

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Mini case study - Size of Emergency Fund
« on: June 25, 2018, 09:46:13 AM »
Married, two kids. My wife is a daycare provider and I work in state government. Our kids are healthy. We don't commute by car so we could do without a car indefinitely if needed.

There's a tremendous daycare shortage and she has a waiting list a mile long. My job is very secure. We both have disability coverage and life insurance. Credit scores are in the 820's.

We currently have $5k in cash as an e-fund, and we are pretty meticulous about saving cash for known future expenses (vacation, summer camps, new-used car in a few years, home repairs, etc.).

We've been putting $350/month into building the e-fund up, and I'm considering either slowing that down or stopping entirely and putting that money towards investments (likely a 457). It just seems a bit unnecessary to have much more than that in the e-fund and I'd love to build the 457 up faster.

Would love to hear people's thoughts on this situation.

LifeHappens

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Re: Mini case study - Size of Emergency Fund
« Reply #1 on: June 25, 2018, 10:07:01 AM »
Emergency funds are one of the topics (*cough* mortgage paydown *cough*) that are more psychological than mathematical. You will see arguments on all sides from having $0 to holding 6 or even 12 months expenses in ready cash.

The way I think about it, is to pick 2-3 true emergencies and your likely out of pocket expenses. For me that would be something like the deductible on my homeowners insurance for a named storm + my max OOP for healthcare. The likelihood of needing all that money at the same time is small, but it works for my psychology.

moonpalace

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Re: Mini case study - Size of Emergency Fund
« Reply #2 on: June 25, 2018, 11:30:39 AM »
Thanks, @Sun Hat and @LifeHappens !

I think I might call it good at $5,000, particularly since we have a separate fund for house emergencies.

2Birds1Stone

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Re: Mini case study - Size of Emergency Fund
« Reply #3 on: June 25, 2018, 02:01:56 PM »
I'm in the $100k camp, but my emergencies are jet-setting with hookers and blow.

Telecaster

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Re: Mini case study - Size of Emergency Fund
« Reply #4 on: June 25, 2018, 09:13:01 PM »
Emergency funds are one of the topics (*cough* mortgage paydown *cough*) that are more psychological than mathematical. You will see arguments on all sides from having $0 to holding 6 or even 12 months expenses in ready cash.

The way I think about it, is to pick 2-3 true emergencies and your likely out of pocket expenses. For me that would be something like the deductible on my homeowners insurance for a named storm + my max OOP for healthcare. The likelihood of needing all that money at the same time is small, but it works for my psychology.

Good post.  The water heater going out  isn't an emergency.  It is a predictable, but irregular expense.  Most irregular expenses can be handled with an extra month's cash on hand, and maybe some springy debt.  Something like a job loss might require more, but those things seldom happen completely out of the blue and that can give you time to build up a cash cushion.   Something like a serious illness might require a good bit more, but it doesn't have to be saved up in the form of cash.  It can be in the form of taxable investment accounts.