DISQUS

The Weakonomist · 8 months ago

My parents have an emergency fund that is far too large. It was so big that when dad bought a car last year I told him just to write a check out of their account. Since then they've paid off their house and so bow have even more cash coming in. I've convinced them to at least open a few CDs, but they really need to invest more. This isn't because they don't have enough for retirement, but because they are throwing away a decent fortune by not investing more.

Craig · 8 months ago

Essentially I don't think an EF could be too big if it doesn't affect the rest of your finances. If you have a solid couple of months, and having more in your EF could cause you to get into debt, or affect your standard of living, than it would be a good idea to hold off. It's all relative.

Grant Baldwin · 8 months ago

I would agree that the size of your emergency fund is relative. What is going to help you sleep better at night? How stable or secure is your current situation? The shakier the ground is that you're on, the bigger your emergency fund should be.

Kim McGrigg · 8 months ago

I feel most comfortable having the three months’ worth of expenses set aside in a savings account for emergencies. That being said, I am realistic about the word "expenses." There are a lot of expenses that could and would be cut in a true financial emergency. That is why I really like that you included "readiness to reduce expenses" as one of your levels.

Stephanie · 8 months ago

I think I might have too much money in my "emergency fund". With interest rates dropping, even in the so-called "high yield" accounts, it seems that I could be doing better things with at least some of the money. I'm starting to pay extra towards my student loans, which is thereby reducing my overall financial burdens. But I have to say, when I got laid off last year, I felt a lot more comfortable knowing that I had enough money in my emergency fund to tide me over for quite a few months. And once I got a new job, I started saving more and paying more on my loans.

Roger · 8 months ago

Not a bad post. Since I got downsized last year, I've been thinking about where I'd go to draw money if I really needed it. Luckily, a combination of unemployment, part time work, and a generally frugal lifestyle means I've been alright to this point, but it's been comforting to have a plan of how to draw down my accounts for living funds (and cut back on my expenses) in order to make due for a while longer.

aa · 8 months ago

People now who are scared of possible layoffs are those without a big emergency fund. Think about that!

Rassah · 8 months ago

My mother-in-law, who is in her 60's lives in a $30k house, and barely scrapes by on $800/month social security checks, has over $40k in a local bank savings account, which pays %0.3APR, and about $50k in cash in a bank safe. she makes about $3.00 in interest a month off of this. We tried many times to convince her to at least put the money into a high yield savings, since it would still always be readilly available, but after months of it we just quit. I guess some people are just too stubborn and paranoid.