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where to put emergency $
Old 10-07-2010, 05:51 PM   #1
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where to put emergency $

Looking for suggestions on where to put my emergency $ (about $20k.) It used to be in an Etrade CD until last year, now it's in Vanguard MM earning close to nothing.
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Old 10-07-2010, 05:56 PM   #2
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I like CD ladders, but have been parking mine in ING plain old savings for 1.1%, No minimums, so I will move it when rates start to climb. Still next to nothing, but better than some other places for now...
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Old 10-07-2010, 06:00 PM   #3
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I like CD ladders, but have been parking mine in ING plain old savings for 1.1%, No minimums, so I will move it when rates start to climb. Still next to nothing, but better than some other places for now...
Capital One is a good spot that earns 1.4% if you set up a Costco account you can even get a 50 buck bonus
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Old 10-07-2010, 08:11 PM   #4
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Emergency money just needs to be liquid - easily available. Maybe I want to be able to write a check against it - most mutual funds allow that. For some reason, people also seem to think it must be 'dollar certain' - why?

If I have a $20,000 emergency fund, it can be in something with some reasonable volatility. Do I really expect an exact $20,000.00 emergency? So what if the money is down to $19,000 when I need it? It could be up to $22,000 too. If I really think it is more likely to be down than up at any random point in time, I should have all my money in low return 'dollar certain' accounts (CDs, Money Markets, T-Bills, etc). The whole point of accepting some volatility is the expectation of higher returns. So why treat an 'emergency fund' different from your other money (other than easy access)?

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Old 10-07-2010, 11:15 PM   #5
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If you don't need it. or at least part of it, for one year you could put some into ibonds. Low risk and one of the few places to put money into fixed assets with inflation protection.
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Old 10-08-2010, 09:52 AM   #6
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I have a layered approach. Some is in a savings account, the bulk is in CDs. I also have some corporate bonds that are a second layer. And I keep a large, untapped HELOC at the ready as well.
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Old 10-08-2010, 09:57 AM   #7
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Emergency money just needs to be liquid - easily available. Maybe I want to be able to write a check against it - most mutual funds allow that. For some reason, people also seem to think it must be 'dollar certain' - why?
I use the generic term "emergency fund," but loss-of-income is the primary "emergency" for which this fund is earmarked. For most of us who are not yet FIREd, an emergency fund is probably best viewed as a "layoff fund."

Lots of folks lost their jobs in or around the fall of 2008, just as the market tanked. Not a good thing if your 50K layoff fund is chopped down to 25K at the same time you need to start dipping into it! In my case, the "dollar certain" requirement is important, because it's linked to X number of months of living expenses, the plan being that within that time I will be able to find another job.

If you're retired already, then yes, it's unlikely that you have a need for a large "emergency fund," but I suppose there are some emotional benefits to having one nonetheless.
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Checkout credit unions in your town.
Old 10-08-2010, 10:02 AM   #8
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Checkout credit unions in your town.

In St. Louis we have First Community Credit Union. You can deposit up to $25,000 & get 2.5% interest. You have to use debit card every month twelve times & have ur paycheck direct deposit. It used to be 5-6% interest! But now they have reduced to 2.5%. Still not bad.
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Old 10-08-2010, 10:40 AM   #9
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A lot of personal finance "experts" recommend a 3-6 month emergency fund or maybe an 8 month emergency fund. Stating it like that makes it sound like it's a safety net for loss of income.

DH is retired with a pension that covers our monthly living expenses so I have to rethink the emergency fund. For us it's more like a Stuff Breaks fund. What could happen to the house/cars/our health that couldn't be covered by insurance or our first level savings?

We're new at this so I still don't have an answer. I think I'm comfortable with a small chunk in a savings account and then some in a mutual fund and the rest in CDs.
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High yield account with usage needs
Old 10-08-2010, 10:41 AM   #10
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High yield account with usage needs

Try this site out. I have a 4% return on up to 25000 bucks on an in state bank. To qualify for the interest there are requirements to use the debit card and make one online payment per month. Mine requires 10 debit card uses which I do with small purchases! Click on compare and open for offers in your zip code. Worth checking into for this emergency type account. Good luck!

https://www.checkingfinder.com/faq
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Old 10-08-2010, 12:51 PM   #11
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If you don't need it. or at least part of it, for one year you could put some into ibonds. Low risk and one of the few places to put money into fixed assets with inflation protection.
The "problem" with the CDs & I bonds is the fine print on their minimum holding periods and interest penalties.
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Old 10-08-2010, 01:04 PM   #12
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How about "in my hand" ?

Seriously, I keep my "emergency money" in TE muni bond funds with Vanguard (VWALX is my choice). I have instant check writing privileges, so if ***t happens, I pull out a check and write it.

In the meantime, sans emergencies, I'm earning some serious 30 day compound interest with no federal tax liability. I am still doing a small amount of DCA to the account to partially "match" the monthly divendends.

Risk? The only time I saw the NAV drop was 4Q08, and it was a mere 10.5%. My response to that was to crank up my DCA amount for a few months.

The NAV has since recovered very nicely.

Call me crazy, but it works.
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Old 10-08-2010, 01:31 PM   #13
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I keep enough in a MM acct to act as a buffer for cash flow when monthly income lags expenses (like when property taxes are due). Another sufficient (for unexpected potentialities) amount is in a short term muni fund. It's earning around 2.4% fed tax free currently, NAV pretty stable, easy access. Otherwise, stay fully invested as much as possible.
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Old 10-08-2010, 04:45 PM   #14
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I use the generic term "emergency fund," but loss-of-income is the primary "emergency" for which this fund is earmarked. For most of us who are not yet FIREd, an emergency fund is probably best viewed as a "layoff fund."

...

If you're retired already, then yes, it's unlikely that you have a need for a large "emergency fund," but I suppose there are some emotional benefits to having one nonetheless.
Then again, if you are retired and rely on interest income to a significant degree, you have also had a significant "loss of income" along with folks who were laid off.
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Old 10-08-2010, 05:55 PM   #15
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I use the generic term "emergency fund," but loss-of-income is the primary "emergency" for which this fund is earmarked. For most of us who are not yet FIREd, an emergency fund is probably best viewed as a "layoff fund."

Lots of folks lost their jobs in or around the fall of 2008, just as the market tanked. Not a good thing if your 50K layoff fund is chopped down to 25K at the same time you need to start dipping into it! In my case, the "dollar certain" requirement is important, because it's linked to X number of months of living expenses, the plan being that within that time I will be able to find another job.

If you're retired already, then yes, it's unlikely that you have a need for a large "emergency fund," but I suppose there are some emotional benefits to having one nonetheless.
OK, I follow you. If the 50K represents all of a persons liquid assets, and they feel they need that for an emergency fund (probably a good idea), you don't want it to be too volatile, just in case.

-ERD50
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Old 10-08-2010, 10:09 PM   #16
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I use the generic term "emergency fund," but loss-of-income is the primary "emergency" for which this fund is earmarked. For most of us who are not yet FIREd, an emergency fund is probably best viewed as a "layoff fund."
yeah, I'm the sole bread winner in the family and there was already talks in the project team about we might not get the gov. funding for the upcoming year, so I don't really want too much risk with these money.
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Old 10-08-2010, 10:57 PM   #17
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If you plan well, then emergencies should be rare, and the costs of accessing your e-fund might not be so important. So even CDs that have penalties might make sense if they offer superior return for the majority of years when the e-fund isn't tapped.

Me, I have more than a year in vanguard prime as part of my asset allocation.
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Old 10-09-2010, 11:30 PM   #18
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Then again, if you are retired and rely on interest income to a significant degree, you have also had a significant "loss of income" along with folks who were laid off.
On the other hand, if you are invested in bonds you should have a significant gain in the value of the holdings. My TIPS holdings are up 25% in the last two years. Nominals have done well -- but not as good as TIPS.

Cash has been one of the worst places to be in the last two years.
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Old 10-10-2010, 03:02 AM   #19
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Hi Hopeful - I would leave 10k (for true emergencies) on my current account and take a 1 year 10k CD.

Good luck

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Looking for suggestions on where to put my emergency $ (about $20k.) It used to be in an Etrade CD until last year, now it's in Vanguard MM earning close to nothing.
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Old 10-10-2010, 11:20 AM   #20
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I keep $5-10K in a personal "high interest" savings account, and $20-30K in a corporate "high interest" savings account. For a significant emergency, I could use that to pay myself a dividend (which would have tax consequences). I also have a HELOC on an investment property and if necessary could raise another $20K there.

Does anyone have an opinion on whether an emergency fund may need to be differently structured in the accumulation and decumulation phases?

So, for example, I am w*rking. Twice a month my pay is deposited in my account. I know what I am earning and I know that the end of year reconciliation will be in my favour. Having the expectation of future cash flows means that sometimes skate "close to the wire" in my personal account, so I check it several times a week and top up from the savings account if needed. But if I were RE, I would want a larger cash buffer.
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