An emergency fund buys you time to figure stuff out, it's not supposed to 100% pay for any potential emergency you have in the next century.
Oh my goodness, LIGHTBULB. That makes SO much more sense than how I have approached our emergency fund in the past, which was a sad attempt at "budgeting" for the unknown. As we have a very positive net worth, even in the very worst case scenario (several concurrent emergencies), the emergency fund would help us get through and beyond the initial "figuring it out" stage until we were able to settle an insurance claim, access an investment, or liquidate an asset.
Having said that, while most people use their emergency fund for expenses that they should have planned, I go the other way. I have a ton of funds that I am saving money in for planned expenses. That could range from vacations to home repairs or car replacement. For example, I currently have $6k saved for a new car when one of ours is beyond repairing. If I lost my job tomorrow, suddenly, that money would get a new job in my budget. Boom, there is 3-4 months of living expenses. If things go on beyond that, I have other funds that could be tapped, and I'm sure reaching 6 months of living expenses could be easily done without touching my brokerage at all. Especially when you consider unemployment benefits and whatnot.
Another excellent point. We are currently saving for a new car in the next 3-5 years, as well as putting a little by for the child we hope to welcome in the next year or three. Should we have multiple, simultaneous emergencies, we would definitely tap those savings envelopes should our emergency fund near depletion, before tapping into investments or assets.
What are your deductibles on your high deductible medical plans?
For each of us, it's in the ~$2-3k range. I have well over double that in an HSA, and I think Mr. Sunflower has about that much.
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Many of you have mentioned the need for assistance cooking, cleaning, shoveling snow, etc. in the event of a traumatic life experience. While I can't say for sure how I would react, I do feel that these activities are helpful in maintaining some semblance of normality and connection to home and family. If I were unable to take care of something for physical reasons, our best friends live across the street, plus we have very strong and deep community bonds here. While I wouldn't expect to rely on the generosity of our friends, I know that they would not want us to hire help, especially if we were experiencing some sort of trauma.
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Thank you all so very much for your input. While I didn't respond to each of you, I did read all of your responses carefully and considered your input and personal strategies.
First, I am going to reduce our emergency fund to 8 months of living expenses in an account bearing 1% at Ally (thank you for the kick in the seat of the pants, Zizi! our old account earns 0.85%, soon to be 0.35%). With unemployment in the case of job loss, this could stretch to 1 year (if we were a single-income family).
In the future, Mr. Sunflower and I may consider something similar to Farmer Pete's strategy, with perhaps 16 months in a taxable brokerage account, and another ~2-3 months of living expenses in our checking account.
Thank you again! I knew I could count on this forum for insight!