Here are the amazing results :
With a 100% AA, you end up in 2016 with 203% of your 2000's original stash.
With a 97/3% AA, you end up in 2016 with 203% of your 2000's original stash.
Wow, sure, you convinced me: the no-EF solution is clearly better ;)
Well, there you go. Even if you have an emergency at the worst possible time--that is, the time when the e-fund provides maximum protection--the e-fund does
absolutely nothing for you. Now you've established the e-fund does nothing, the argument in favor of having one is....what, exactly?
If the e-fund provides no benefit in the times they are supposed to help the most, when exactly
do they help? A good guess based on your example is "pretty much never."
Don't get me wrong. It is your money. You can put it in gold bars or Arabian stallions if you like. But maintaining an e-fund is common financial advice, and it is bad financial advice most of the time. And many (most?) people don't realize that it is bad advice, and maintain an e-fund because they think they are supposed to and believe it provides some benefit. I can see that an e-fund could make sense for a younger investor just starting out, and some other special circumstances, but as general advice? No. As
general financial advice, no you don't need an e-fund, and no, they don't provide a benefit, as your post illustrates.
I find this somewhat similar to the pay down the mortgage debate. Many people believe paying extra on the mortgage is to their financial advantage, but in reality is almost never is. It is a just a belief. But there's nothing wrong with paying down the mortgage,
as long as you understand that's a sub-optimal financial strategy. And many people recognize it as suboptimal, but say they don't simply want to have a mortgage, so they are paying it off. In that case, more power to ya! Same thing here. If you want to have three months or thirty years expenses in cash, then knock yourself out. But it is prudent to make a decision like that from a position of knowledge, not because "everyone says so."