How big is you emergency fund?

[somebody8198]

My emergency fund is over one year of living expenses. Not even bare-minimum living expenses, which would make it more like 1.6 years, since I could always move to a cheaper apartment if I lost my job. Is this too high? I feel like it's too high.

Also want to poll where Mustachians keep their emergency fund. I'm very conservative with mine but maybe too conservative.

[RedmondStash]

I'm not sure what you mean by an "emergency fund." We don't really have segregated money for that. We do have a certain percentage of our net worth in cash, and we have a HELOC that we can draw from if the stock market starts bouncing all over the place.

If you mean how much is in all cash, I'd say about 8 months' worth, but it kind of fluctuates. And that doesn't count bond investments, which tend to be more stable than stocks.

[Sailor Sam]

I keep 50k in a money market account, which is 1.5 to 2 years of expenses, depending on housing.

There have been a few threads on e-funds, which you could also check out. In the end, the size and allocation of your emergency fund comes down to your assessment of risk. Some people have no cash reserve, and are confident they can meet a cash emergency with HELOC, credit cards, or selling equities. I have enough credit, and enough job stability to give up my e-fund, but I don't have the emotional stability. So I keep the cash.

[oneday]

The responses to this topic seem to be a very individualized.  RedmondStash & Sailor Sam hit on the high points: access to credit, less liquid funds such as stocks, job stability and/or 2 income family, individual comfort level.

Personally I think access to credit is just too risky. Once established, lines of credit are not guaranteed for any time period (in general).  It could be just at the point when you need that loan that the lender decides to yank it away from you.  If one does go this route, best to have a backup fund as well.

We are on the cusp of a mortgage refi & after we send the paydown, will have to decide what to do with the left over $$ in savings.  I suspect we won't feel the need to keep as much in cash now that the mortgage will be a far lower payment.

We keep our emergency fund in an online savings bank making 1.0%.

[RedmondStash]

Job security is a good point. Spouse & I are currently both employed and making decent money, and we're saving most of one salary. So we currently have positive cash flow. When we're not both working, we'll likely up our cash reserves somewhat.

[2704b59cc36a]

$32K for 1 year. I prefer one year, all cash. It feels the most safe to me even though I have a taxable account. That's also maintaining some standard of living, too, not bare bones living which it would be hard to switch to after living one way for so long.

My money is at LMCU @ 3% and at Ally @ 1%.

[TabbyCat]

I should probably be more embarrassed by this than I am, but we only have $9k in readily available checking right now and our real emergency fund for a major emergency would be to draw down contributions from the Roth IRA without penalty or to cash out non-retirement account investments. I can't think of many situations where we would need more than a few thousand without the flexibility to wait a few days for funds to sell.

[dreams_and_discoveries]

I don't really have a specific ear-marked emergency fund.

My budget itself has lots of 'padding', I can easily absorb unexpected costs of £500-£1k by tightening my belt, and usually have a lot sitting in my current account as I pay myself dividends quarterly.

Failing that have reasonable limits on cards, funds in P2P that outputs ~£400 a month and money in taxable accounts I could get out in a few days.

[mwulff]

We have about 3 months of living expenses in our emergency fund/savings account. But with the way our system works if we lost our jobs then unemployment benefits og "sick-benefits" would kick in immediately and we can live of that basically "forever" until we are ready to work again.

Our savings account is more of a stash for when we want to buy a vacation, replace something that broke or some unforseen expense pops up.

We take a more casual path towards FIRE than most people on this board but we will get there eventually.

[Metric Mouse]

I have well over a year's worth of cash in the fund. It's there for my day-to-day living expenses, to ride out a bad market or to add to the 'stache if the markets blip down again.

[chemistk]

Right now, our emergency fund is a dedicated $5,000 in an Ally account that also holds money for other near term expenses/goals (cash for wife's last few classes, saving for down payment on a home). So, the total in liquid assets is much more if we needed it but the $5k would cover 2-3 months with a lot of belt tightening.

[sleepyguy]

Not sure what 'counts' as an emergency fund.  We pretty much don't use one... BUT in Canada we have something called TSFA that can easily liquidate with no tax penalties.  We have over $100k in there... we have option of a LOC that we never use that has a limit of around $60k if I last recall.

We always keep our checquing account steady around $4-5k at all times.

Personally we generally have a 'built-in' lifestyle we can always be fine if one of us is out of work... always no question about that.

[newton]

About a 1/3 of my annual salary in a typical savings account.  About 10% of salary in checking account. 

[Jon_Snow]

We always try to have about 50k in cash in our "high interest" (lol) savings account. Can't imagine an emergency that would necessitate having such an amount handy...it exists mainly to allow us (well, really ME) to act quickly and decisively in terms of investing opportunities that may arise. 20k may be withdrawn from this "fund" to, let's say hypothetically, invest in a bunch of downtrodden energy names (I MAY have done this recently)...then over a period of months we would build the fund back up to 50k...which is where it currently stands. :)

Not a strategy I would suggest for everyone, but it's worked well for us. It's all about having DRY AMMO.

[undercover]

This big:

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[RedmondStash]

This is interesting. One of the reasons we keep cash reserves relatively low is so the bulk of our money is invested in admittedly riskier stock and bond index funds. We have access to enough money to cover living expenses for probably 2-3 years without liquidating our investments because we know the market can bounce all over the place, but we trust that that's the best place for our money over the long term of 10+ years.

Do any of you worry about missing out on potentially larger gains by having more cash on hand? Or is the stability of cash worth it based on risk tolerance, market fluctuations, and other factors?

[soccerluvof4]

Currently 4 years living expenses cash in interest bearing savings account. If market takes a big hit would reduce that to 2 years.

[Monkey Uncle]

We maintain a minimum of about 5k in the savings account.  It fluctuates some as we save and then draw money off to put into the brokerage account.  My job is pretty stable, so there is no reason to keep 10s of thousands of dollars in an account that isn't earning any money.  If something blows up and we really need a lot of money, it's easy enough to raid the brokerage account.

[oneday]

Do any of you worry about missing out on potentially larger gains by having more cash on hand? Or is the stability of cash worth it based on risk tolerance, market fluctuations, and other factors?

I for one do not worry about the opportunity cost of my emergency fund because the peace of mind that the cash gives me outweighs it.

[PhysicianOnFIRE]

About 1.5 to 2 months in ready cash (between local bank and Ally online accounts), plus many years of expenses in a taxable account that is 2 business days away.

[Roadsidetreasurehunter]

I have 1.5 years of cash for living expenses in a money market account.  It makes me feel safe but also bothers me a little that I don't invest some of it.  I expect my job will sunset in about 4 years and the cash will provide me time to find a job w/o being in freak mode.

[Taran Wanderer]

We have about 4 months of expenses in short term savings, more if we cut back on discretionary spending and dropped expensive part time daycare because we both work.  In addition, there is the 4 to 8 weeks of vacation and sick pay that I have at any given time which would come in a lump sum if I was cut loose.  I am happy to be in the position that if I lost my job unexpectedly, we'd probably just go on an extended vacation and then figure out what we want to do next. If DW lost her job unexpectedly, we'd just save less, even if she never worked again.

[Sailor Sam]

Do any of you worry about missing out on potentially larger gains by having more cash on hand? Or is the stability of cash worth it based on risk tolerance, market fluctuations, and other factors?

Nah, the opportunity cost of holding cash doesn't fuss me. My reasons for keeping a large amount of cash is emotionally driven. I had a period of poverty in my life, which made a huge impression. I also work in a field where I witness people enduring things they never thought would happen to them.

Being alive has an element of uncertainty. Cash won't keep you safe, but it might cushion the fall. That's my theory.

[jexy103]

DH and I currently have just under $5K in our checking accounts, which is more than enough to cover our credit card current balances. He's active duty military and I'm a federal civilian, so we both have very stable jobs (and could live on his if I lost mine). We live and work on post, so we can ride our bikes most places, so we're not worried about a car emergency. The most likely emergency for us to have would be a family emergency back home; those expenses could be put on credit cards and cash flowed before the bill is due. We live in on-post housing, so no possible house emergency (except it burning down, and we have renter's insurance). If we ever did need more, we have almost $100K in a taxable account and over $50K in our two Roth IRAs.

[JLee]

I usually keep ~$5k in my checking account for ~$1500/mo in expenses, which could be cut dramatically if I decided to go back to AZ and sleep on the couch in my house (because I rented all the bedrooms out to friends when I left).  I have a very secure job (it's incredibly difficult to get fired here), so I'm not all that concerned.

If I was a contractor with frequent job changes, I'd up that substantially.

[Grigory]

I always keep $1,000 in my savings account for easy access, should anything unexpected happen. I have all sorts of insurance to protect me from emergencies. If I need to withdraw a large amount of money, it'll take less than a week to liquidate some of my stock holdings and wire the money back to the bank.

[PAstash]

I keep 10k in cash. HELOC for the same amount which would be the back up for my back up. after that I could tap CDs/bonds/equities. I live in a two income house hold. I also have a very stable job.

The thing is 10k can more or less take care of just about anything without losing too much interest. anything more then that I feel like I'd be taking a bath on the inflation/opportunity cost of not have it invested.

10k is a new roof. it's a decent car. it's any auto repair. it's a new furnace. Basically sit down and think about anything that could go wrong. then times that by 1.5. that's how I came up with my number. this number will be different for everyone. remember to have layered protection by risk. Have some cash then some cds bonds tbills equities ect...

Keep in mind keeping your E-fund in a CD that's long enough to beat inflation is good. If you don't have a emergency you will not lose anything. If you do you will just lose the interest which you would have lost anyway because of inflation. Tbills are another option. I prefer CDs.

Hope this helps.

[Rosy]

Do any of you worry about missing out on potentially larger gains by having more cash on hand? Or is the stability of cash worth it based on risk tolerance, market fluctuations, and other factors?

Nah, the opportunity cost of holding cash doesn't fuss me. My reasons for keeping a large amount of cash is emotionally driven. I had a period of poverty in my life, which made a huge impression. I also work in a field where I witness people enduring things they never thought would happen to them.

Being alive has an element of uncertainty. Cash won't keep you safe, but it might cushion the fall. That's my theory.

Smiles - period of poverty in my life - changed my outlook on life and cash on hand forever. DITTO

We have roughly 10K. It's a good  starting point, 25K would make me feel safer. I really don't trust anything - currencies can lose value or become worthless overnight. Banks may not release your cash and freeze your account.
Credit cards like MMM suggests - not safe since they can yank the limit at any time they please.
Heloc - see above.

Ours is in the bank at 1% and 3% and there will be some in cash at home in the future - just because I'm paranoid. I get that all one can do is shore up for emergencies and move on, which is what we do, but I sure wish I had the blue eyed trust in banks and governments I see so often portrayed in these threads.
... and no, I refuse to rely on Vanguard or whoever to release my funds in time for my emergency and I despise penalties or losing out on the market upswing. I want to put my hot little hands on the bills the second I think I might need them - as in from cash at home or my nearest credit union.

We each have about $1000 to $3000 extra in our accounts as well, which keeps us from having any small time emergencies. We just deal with it if something comes up.

[Squirrel away]

UK here so may be different, I feel like I'm always saying that on here.:D

£3,600 x 2 in 6% interest accounts.
£5,000 in 4% account.
Rest is in an ISA, low interest rate with that one. We needed the emergency cash recently as we had a big vet bill.

[2buttons]

A month a head on bills. 3 months additionally in cash. 3.5 months invested in taxable, and slowly adding a little to the latter two each month.

[Tjat]

My wife is very hesitant to invest in the markets and has all her savings in cash (I know...). So we treat her savings as an e-fund, which equates to 4-5 months of expenses (about 15% of our investable assets) at our current standard of living. We also have combined credit card limits of 110K, so I imagine in a true emergency, we could use those.

[Paul der Krake]

A cool 10k, which yields a cool $100/year: easy round numbers. I wanted 5k, my wife wanted 20k. Compromise.

[steviesterno]

i guess i'm looking as an "emergency" differently. we keep almost nothing in stagnant cash, between probably 5-8k we'd have access to instantly. if it's truly an emergency (we both get laid off, major expense) we will liquidate either some of my hobby firearm collection or borrow. with good medical insurance, decent car insurance, enough in cash to cover a semi-major home/car repair (new air handler or motor) and my wife and I in different industries, I'm not super worried. we've set it up so we can live on either salary, and pretty much invest the other. In an emergency, we just stop investing for a month or 3. shouldn't have to touch anything the incurs a penalty.

but in a real, all bets are off, end of the world type emergency? Sure, I'll raid the 401, 403, other accounts. what's the point of working to have money if you don't use it when you need it?

[Davids]

My emergency fund consists of $10K in a regular checking account (0% interest) and $30K in an online savings account (0.75% interest). It is more than what I want to have but my wife is insistent and as such I am ok with having a more cash balance if it makes her happy. Happy wife, happy life.

[thedayisbrave]

$3-5K in checking account for bills (mostly on CC, paid in full each month), about $1500 in spending each month so a little extra buffer there which is usually enough for unexpected things (eg new tire when I picked up a nail etc)

Currently building cash reserves.  I do some real estate and small business investing.  Used to be of the mind that every spare cent gets invested, but then I'd happen upon some juicy looking investment opportunities and have to decline because I didn't want to liquidate my equities just to free up the cash.  So I started building up cash instead of investing excess in the markets.  Exploiting my local knowledge basically.

Aiming to build up $50K-$100K cash.  Maybe 10% of the way there.  But I'll get there pretty quickly with my low expenses.

[Giro]

I'm trying hard to decrease my emergency fund but it's a big change for me.  I've always been fairly conservative but I want to have all of my little green soldiers working.

It's tough giving up that security blanket.

I will get it down to $2500 in a savings account and probably $1500 in a checking account.

[RedmondStash]

Interesting. Thanks for the responses re opportunity cost vs. cash liquidity. It's something I wrestle with frequently myself. Part of me says, "Work, dammit, money, work!" And the other part says, "Yeah, but next time the market loses 50%, how can you be sure 1/3/5 years is enough time for it to recover so you don't have to sell low?"

We're relatively aggressive in our investment AA, though we do have a hefty percentage of our net worth in home equity, which isn't exactly working hard. So the proportion of our net worth that's in stocks is lower than it seems when looking at our accounts online.

So a more complete answer about emergency funds/cash is: about 8 months straight cash, about 2.5 years in untapped HELOC, and about 2 years in bonds. And that's at our current spending rate, which is honestly pretty high, and which we're actively working at reducing.

[ender]

Interesting. Thanks for the responses re opportunity cost vs. cash liquidity. It's something I wrestle with frequently myself. Part of me says, "Work, dammit, money, work!" And the other part says, "Yeah, but next time the market loses 50%, how can you be sure 1/3/5 years is enough time for it to recover so you don't have to sell low?"

One approach is to determine a security factor (say 2x or 3x) and then have investments that are worth that in taxable accounts.

So if you decide you want $10k in an emergency fund and have a security factor of 2x, you would put about $20k into taxable accounts. If it drops 50% you still have your $10k you want. $30k if you want 3x. Etc. It doesn't have to be 100% stocks, either, it could be 60/40 or some other ratio.

[TravelJunkyQC]

6 months bare-minimum in cash and another 6 months available in a small line of credit. I also have bonds that I can pull from if need be - those would cover about 3 years if I remove them all. This is without touching any investments.

[JoRocka]

I'm a total baby stash trying to triage my debt- some days it feels hopeless- but I work 2 side jobs that pay cash so I have a few hundred dollars saved up at home- but I'm leaking money like a sieve on a high interest rate CC- and trying to plan a small wedding.... it's practically impossible to get ahead where I am right now- after we get married- we'll be able to dump an entire pay check into our debt and pay it down in 2 years. The man has a much better handle on it and is much better at organizing my bills and payments so he's confident we can do it- I on the other than- sometimes think it's hopeless and I just go buy more lipstick instead.  #fail.

so only a few hundred is the short answer. It's hard to have a savings fund when you are in a debt crisis.

[HPstache]

3-4 months cash

[2Birds1Stone]

1 Year due to job security/sporadic commission structure.

[Inaya]

6 months' expenses, but I'm thinking about reducing that. It's gaining a paltry .95%, and I'm not happy with that.

[The Fake Cheap]

The good old emergency fund topic.

My emergency fund = $0 since I currently have debt.

Here is my take on the emergency fund: if you have no debt, are steadily employed with good work benefits, and have available credit, then it likely makes more sense to invest your money than to have a significant amount of money sitting in a savings account "just in case".

[Telecaster]

The good old emergency fund topic.

My emergency fund = $0 since I currently have debt.

Here is my take on the emergency fund: if you have no debt, are steadily employed with good work benefits, and have available credit, then it likely makes more sense to invest your money than to have a significant amount of money sitting in a savings account "just in case".

^ This.  I have quite a few years worth of expenses in stocks that I can access if I have an emergency.   We usually keep about an extra month's expenses in the checking account because occasionally there are big ticket items that need dealing with.  But other than that, I want to keep the green soldiers out on the front lines, doing their thing.   

[TheInsuranceMan]

Cash Efund at 4K, which is 4 months of expenses.
Then between our credit cards, we have another 10k of available funds if needed.

[HenryDavid]

It is yuuuuge.

[AlwaysLearningToSave]

I should probably be more embarrassed by this than I am, but we only have $9k in readily available checking right now and our real emergency fund for a major emergency would be to draw down contributions from the Roth IRA without penalty or to cash out non-retirement account investments. I can't think of many situations where we would need more than a few thousand without the flexibility to wait a few days for funds to sell.

Our emergency fund is smaller than I would like it to be while we pay of student debt.  After we pay that off, I aim to follow your approach.  I want to have $10K in cash (about 3 months of not-too-lean living, which could stretch longer if we tighten belts).  Then, I want to contribute to Roth IRAs so that we have a second tier of relatively easily accessible funds that we could touch only in a big emergency.  I figure the odds of us having such a significant emergency are low enough that it does not justify the opportunity cost of keeping more in cash. 

I think of the "emergency fund" as primarily a hedge against loss of income or significant medical expenses and not as a way to pay for large expected-but-difficult-to-anticipate expenses (i.e. new roof, new furnace, new car).  I can't think of many large expenses that we wouldn't be able to cash flow.  If we incurred such an expense, we would borrow from the emergency fund or a traditional lender and pay it off in a few months. 

[jallred22]

Cash on hand for 3-6 months of expenses = emergency fund

[oneday]

so only a few hundred is the short answer. It's hard to have a savings fund when you are in a debt crisis.

So true.  If we had debt, I'd have a MUCH smaller e-fund.  Hard to watch that cash in the bank (practically) getting moldy while the credit cards pile on the interest.