Emergency Fund amounts

[kfindley79]

I'm aware of the recommendations from various sources...

3-6 months worth of expenses

Suze Orman wants 8 months of expenses

Those are fine to live by but I was wondering what everyone here has put aside. I'm not asking for dollar amounts...simply how many months worth. Also, if you want to, what is your thought process for having that amount?

Thanks!

 

[REWahoo]

I'm retired. My emergency fund is my entire portfolio.

Prior to retiring I tried to have 8-9 months or so of expenses in a money market account. Of course that was long, long ago, when those accounts actually paid interest...

 

[ziggy29]

If we cut back on discretionary stuff (as we would during a "crisis of income"), we probably have a little over 2 years. The traditional guideline was often 3-6 months but in the era of persistent elevated unemployment, I'm hearing 6-12 months a lot more often now.

That includes our I-bonds which have a sweet 3.4% real component yield (from 2000), but they are only part of our emergency funds not yielding 0.000000531%.

 

[FUEGO]

I have about 1 month. Not really emergency fund but rather operating cash to pay monthly bills and deal with large one off payments like annual taxes or insurance.

We basically live off one of our salaries and bank the other one, so a job loss for one of us would mean we just save less each month and keep living as we always have been. And our anticipated unemployment payments are high enough that we could live off of one person's unemployment if it came down to it, so we could sustain 2 job losses and 99x2 weeks of unemployment before cash flow became an issue. In the mean time our mid six figure taxable investments could provide a nice backstop.

 

[Bimmerbill]

It also depends on how secure your job is.

 

[W2R]

I'm retired. My emergency fund is my entire portfolio.

Prior to retiring I tried to have 8-9 months or so of expenses in a money market account. Of course that was long, long ago, when those accounts actually paid interest...

+1 However, if I was in the accumulation phase right now, I'd probably want to have enough to cover 2 years' expenses in my emergency fund, due to the bad economy, including unemployment, real estate plummeting, and so on.

 

[REWahoo]

+1 However, if I was in the accumulation phase right now, I'd probably want to have enough to cover 2 years' expenses in my emergency fund, due to the bad economy, including unemployment, real estate plummeting, and so on.

Note: This is coming from an individual who is trying to cause a wheee-induced market crash, and who is so risk averse she wears a belt, suspenders, duct-tapes her blouse to her skirt, and is giving serious consideration to putting on a set of coveralls...

 

[FUEGO]

It also depends on how secure your job is.

True. I work for the government and while I am completely terminable at will, I am on multiple projects that have full funding held in a legally binding trust and one project has a 4+ year delivery schedule, so pretty sure the work won't go away any time soon. And given the upcoming election, I am lucky (in this case) to be one step removed from the political appointees around me. Their time is ticking away and they are scrambling like rats to get another gig going since they probably won't be here past November-ish.

 

[W2R]

Note: This is coming from an individual who is trying to cause a wheee-induced market crash, and who is so risk averse she wears a belt, suspenders, duct-tapes her blouse to her skirt, and is giving serious consideration to putting on a set of coveralls...

I'd like to confirm all of the above, in case anyone has any doubts.... Plus, due to the nature of my work it would have been almost impossible to find another job in my field anywhere (much less close to home) had I lost the one I had.

 

[ronocnikral]

12 months (half in 5 yr CD's yielding 2.3% w/ 2 month penalty for canceling and other half in online savings). working on 2 years which will be invested a little more aggressively in things like short term bonds.

DW recently found about $2000 in EE bonds yielding 4%....

 

[GrayHare]

I have long found it odd that so many advisors exclude all non-cash investments from the emergency fund. If I were holding decades of expenses in blue-chip stocks but only 3 months in an emergency fund, Suze would be on my case. IMO if I needed cash I'd simply sell some stocks since they are very liquid. If Suze is concerned those stocks might become inaccessible or worthless, well, whatever financial meltdown caused that would likely also make emergency fund cash held at a bank similarly inaccessible or worthless.

 

[LOL!]

I'm afraid my kids will be kidnapped, so I keep a few million in cash and gold coins in the safe in my living room behind the Renoir painting. You know, just in case I need to pay ransom or something.

 

[Midpack]

I'm aware of the recommendations from various sources...

3-6 months worth of expenses

Suze Orman wants 8 months of expenses

Those are fine to live by but I was wondering what everyone here has put aside. I'm not asking for dollar amounts...simply how many months worth. Also, if you want to, what is your thought process for having that amount?

Thanks!

I think Suze has upped her # of months for an emergency fund in response to the recession we've gone through, uncertainty, above average unemployment, etc. The thought process is as always how much $ would you need if you lost your job, so as to avoid having to sell possessions and/or risk losing your house. How long would it take to find a comparable job worst case?

Like others here, I've always had more set aside, but the rules of thumb above are probably good minimums. What you should have when your working and what you should have once retired are typically very different, one shouldn't compare with the other.

 

[Texas Proud]

As you can see, the answer is all over the board.... because a number of people are retired and have different needs than the people who get a paycheck... and then there are the people like my sister who has a pension which pays for all of her needs... so an emergency fund is not needed as much...


Then there are people like me who just invest their money... I have very little money in a bank or MM account... I do have some in a ST bond fund, but that is about 1 month... If needed, I would then go to the junk bond fund with maybe 10 months... then stock funds etc. etc.

So far in my life (after getting a good job), I have never needed any kind of emergency fund... the only time before that was when I was a teen and got a speeding ticket I could not pay... Mom came through

 

[panacea]

We keep little cash, maybe 3 months in ST bonds and rest invested for the long haul. It really depends on job security and a persons fixed expenses. Also things like disability insurance coverage and potential for your house and car to fall apart.

 

[scrabbler1]

I keep some of my money in various layers based on ease of liquidity and preservation of principal. I have had, since 1990, various amounts in intermediate-term muni bond funds and long-term muni bond funds (and for a brief time, a short-term corporate bond fund). This comes after the cushion I keep in my local bank's checking account which has the most immediate and easiest access. That cushion above the minimum balance to avoid fees is about $1,500.

The intermediate-term muni bond fund includes checkwriting privileges so it is a little easier to access in a pinch, while other funds would require an electronic transfer to my local bank's checking account before I could write checks on it or get cash.

Being ERed for 3 years, I have a steady flow of monthly investment income but I have had to tap into the intermediate-term muni bond fund a few times. Being in a lowere income tax bracket than when I was working, I don't mind "draining" the muni bond funds as I have done in the last 3 years.

When I was working, I had a pretty large amount in the bond funds which could be construed as my emergency fund, but as the stock market boomed in the 1990s I had much more in stock mutual funds.

 

[Nords]

Also, if you want to, what is your thought process for having that amount?

It needs to be six-eight months of the expenses that you'd actually bother to pay if you were between jobs.

Groceries, utilities, job-searching gas: sure.

Entertainment & dining out: Nope.

Kid's sports, other family discretionary expenses... tough decision. Maybe one or two, but certainly not all.

At six months the cable TV subscription would be canceled and everybody could either turn in their cell phones or get their own job to pay the bill.

After six months I'd be seriously debating whether to continue paying a mortgage.

 

[growing_older]

The "emergency" I most prepare for is job loss in a down economy or when my career field is disrupted in some way I didn't anticipate so it could be a long time before I get a new job. Anything else (need a new furnace, big car repair, etc) is well under the the cost of a job loss emergency, so they don't need a separate fund. Conventional wisdom says that the "emergency fund" has to be liquid available and not at risk. I'm okay with that for some amount, but if I'm going to have a job emergency I'm not going to need all the money on the first day. I keep about 6 months of expenses in a money market which earns zilch but is available easily. I've got another 6 months or so earmarked as the rest of the emergency fund, but in reality invested for decent return. I don't expect to need to hit an emergency that deep and in all the years that I have NOT hit such an emergency this fund has earned enough that even if I am forced to sell in a 60% market cataclysm I will still have come out ahead. Beyond that, if I squash my lifestyle down enough I'm FI, so that's a kind of real long term emergency fund, if it were that deep an emergency.

 

[truenorth418]

In the spirit of the "buckets" approach, I intend to keep about one year's living expenses in a high yield savings account in addition to my current year's spending bucket which I fill with ongoing dividends and interest income. This should be enough to address any catastrophic emergencies or allow me to take advantage of any investment opportunities. I also have a bunch of I bonds I have accumulated since the early 2000 that helps me sleep well at night.

 

[REWahoo]

a high yield savings account

It may have that label as a legacy but I doubt any savings account currently has the performance to qualify as 'high yield'.

 

[truenorth418]

It may have that label as a legacy but I doubt any savings account currently has the performance to qualify as 'high yield'.

Well, ok, in this context, by "high yield" I meant "practically no yield at all".

It's in an FDIC insured account, which might be safer than my mattress.

 

[martyb]

Only 1 month. I figure I can pull money from my Roth IRA in an extreme situation.

 

[Retire2013]

This is a great thread, thanks to the OP. I keep 18 months of living expenses in a money market account for my emergency funds. I have no mortgage and zero car payments so I am hoping that 18 months should be enough. It is also relatively easy for me to find work in my field (I am a CPA in the Wash DC area) albeit not necessarily at the same salary level.

 

[Sue J]

For emergencies we've got 9 months cash in a local bank savings account paying 1.5%. DH's pension covers our monthly living expenses so that's more for other/unknown emergencies.

 

[eridanus]

3 months of cash
1 month of I-notes (from 2002 time frame but as notes they're cashing out this year)
8 months of brokerage accounts, at 50% market loss