We owe a little less than $4,000 on our 2006 Scion XB (mileage around 70,000). We have about $5,400 cash in the bank.
A LITTLE BIT OF BACKGROUND: I AM 30 & NOT YET RETIRED! ACK! I am also married with 2 kids. We are both employed, but work hourly. Make about $40,000 yearly together. I had a baby last fall, followed by some health problems, so I do have quite a few medical bills (despite health insurance). We spend ~$4,600 on "Health" in the last year (medical bills, insurance) & I still owe more (not sure the exact total of medical bills owed). We also owe on our house ($42,000) & have student loans (my husband's, in IBR right now). As far as the car goes, the monthly payment is $230. I usually pay $300/month.
MY DILEMMA: Having cash in the bank is a huge safety net for us, but I also want to *crush* our debt and begin saving & investing.
MY QUESTION: How much of a cushion is reasonable? Is $5,000 too big of an emergency fund? Too much to just have chillin' in the checking account (2.5% interest to us every month)?
(Unfortunately, as of right now, we do not save that much every month. A very small amount.)