How much do you have in your Emergency Fund?

[nyssaneala]

We're getting close to my initial goal of $10,000 in our Emergency Fund savings account. We cleared out our savings last year when putting a down payment on our house (this was planned), and it's finally starting to get padded again. Once it's at $10k, we plan on plugging away at paying down our student loan debt, and contributing more into a retirement account. But now I'm starting to wonder if $10k is enough, or if I should come back in a few months and keep adding to it.

I know that whole six months savings thing, and I think this would cover it. My husband also has disability insurance (it's somewhat mandatory in his job field, he's a surgeon and if anything would ever happen to his hands, his career as a surgeon would be over).

How much do you keep in your EF?

[SunRise]

I have 6 months worth (which could be stretched to 7 months) and I am still adding to it as well as contributing to IRA and other savings

If I were to lose my job (this emergency fund is more of a transitional fund) I  want enough for a year; one month for transitioning from going to work every day to staying at home; 5 months to just do my own thing with my kids, and then another 6 months to find a new career. In this time I probably would pick up some part time work for personal growth and it would stretch the savings as well.

1600 / mth covers mortgage,bills and food - bare bones (i have no debt), but I save for a 2000 / mth budget so lifestyle remains similar (extra curricular sports, travel, job interview expenses, unexpected expenses (death of car) etc).

Edited by SunRise - 8/19/12 at 4:47am

[Poddi]

We have about 5 - 6 months' EF.  We're comfortable with that and don't feel we need to keep more in there.  We're just saving for other stuff for now.  It all depends on your current goals and your comfort level.  If you think you'll feel better with more, by all means add to your EF.

[esmicosaquehago]

Zero, unfortunately.  We are living mostly off of student loans right now.  We have a high-limit credit card which we do not use at all, so that it is available if we have an emergency.  I keep as much liquid as possible though.  When we get our tax refunds, it goes into savings, and it covers the inevitable expenses such as car repairs and medical. 

[JenRN]

We have about 4.5 months of full expenses, or 6 months of reduced expenses (figuring we wouldn't try to keep our current lifestyle and eat out as much, go on shopping sprees, etc. if we needed to dip into savings).

I feel comfortable with that amount. DH is an accountant at the corporate headquarters of a manufacturing company, so fairly stable unless the whole company closes down. I am an RN, so while it may not be the area or hours I want to work, I could pretty much always find a job if necessary. If only one of us was working/was able to work, I would feel safer with a year in the emergency fund.

[anjelika]

I just restarted our emergency fund today.  $5, which will be my bare minimum contribution per week until the end of the year when my hospital bills are fully paid off.  My first big goal is $1000.

[youngspiritmom]

Originally Posted by anjelika 

I just restarted our emergency fund today.  $5, which will be my bare minimum contribution per week until the end of the year when my hospital bills are fully paid off.  My first big goal is $1000.

Way to go anjelika!!

[sarah11221]

We have four months of "nothing changes" living expenses in savings...meaning we could have no income for four months and still be occasionally eating out, able to cover emergency car repairs or ER visits, ect.  My goal is to have six months in savings.

[LilyLiberty]

We have two emergency funds, one that is for car repair/vet emergency/window breaks type things, and that is $1,000 and we absolutely do not touch it. The other is our "lost job/changing jobs" fund and had 8  months worth of my husband's salary in it because I'm paranoid. Happily (or not?) my paranoia paid off when he took a new job (at a significant pay cut, but he's happier) that required us to move across the country. There were a lot of transition expenses, the new housing we were given was unfurnished so we had to get what we could afford (our night-stands are upside down cardboard boxes for the time being, but we needed chairs and a mattress more than nightstands! :) ) Our car needed major repairs, we had to buy a washing machine, etc and before you knew it our transitional fund was down to $3,000. Although I'm annoyed that we'll have to spend forever and a day building it back up again I am happy that we planned ahead. The fact that the money was there when we needed it was such a relief -- we're debt free, always have been and really hope to be keeping it that way for the rest of our lives.

[nyssaneala]

This has all been very helpful! I have decided to set up 3 savings accounts. One is a no-penalty CD (Ally Bank) which is where I put the bulk of our emergency fund ($8,000). It is also at the highest interest rate. We have a second savings account I just opened for any emergency car/house repairs, which I will probably build up to $4,000, and can access immediately if I need to. The third (our original savings account) is where I stash money to save for travel and our daughter's tuition. Usually the money we get each month through our FSA goes directly into this, as well as the quarterly mileage reimbursement checks from DH's job.

We still plan on focusing on student loan and retirement for the next few months, but will probably start adding more money into EF next year after I am happy with our retirement contributions. I might set up a few of the No-penalty CD's so that they mature at different points in the year. They seem to be the highest interest rate I have seen without having to put money into a CD for years before maturing.

[anjelika]

Nyssaneala, thanks for sharing your savings plan.  I'll have to check out Ally - rates look really good compared to my local banks'!

[TiredX2]

Originally Posted by nyssaneala 

This has all been very helpful! I have decided to set up 3 savings accounts. One is a no-penalty CD (Ally Bank) which is where I put the bulk of our emergency fund ($8,000). It is also at the highest interest rate. We have a second savings account I just opened for any emergency car/house repairs, which I will probably build up to $4,000, and can access immediately if I need to. The third (our original savings account) is where I stash money to save for travel and our daughter's tuition. Usually the money we get each month through our FSA goes directly into this, as well as the quarterly mileage reimbursement checks from DH's job.

We still plan on focusing on student loan and retirement for the next few months, but will probably start adding more money into EF next year after I am happy with our retirement contributions. I might set up a few of the No-penalty CD's so that they mature at different points in the year. They seem to be the highest interest rate I have seen without having to put money into a CD for years before maturing.

Today I was reading about emerency funds and read an interesting suggestion.  This person's idea was that if your emergency fund is a *true* emergency fund (not a large expected expense fund for car or house repairs but a fund for completely unexpected expenses like a prolonged job loss or illness) you can simply put it in a Roth IRA.  That way, in an actual huge emergency you *could* withdraw the initial investment (contributions can be withdrawn at any time without tax or penalty from a Roth) but if you never need it then you have it tucked away for your retirement.  Since retirement funds are capped yearly, once the year is gone you can never get that investment potential back.  This person was making this comment from the place that they had over $100K in their Roth IRAs so no longer had a true emergency fund (but did have savings for large ticket item) but felt safe with it.  Since they had not had an issue they would have considered a "true" emergency in 10 years (that they've been doing this) it did seem to be working for them. 

[EmsMom]

It isn't a bad idea, but in reality ira funds can crash, and have indeed done so in 2008.  Most funds lost substantially at that time, although have recovered.  If you needed access to the fund at that time, you could have been in trouble.  So some of it should most likely be in a regular insured savings account.
 

[TiredX2]

Originally Posted by EmsMom 

It isn't a bad idea, but in reality ira funds can crash, and have indeed done so in 2008.  Most funds lost substantially at that time, although have recovered.  If you needed access to the fund at that time, you could have been in trouble.  So some of it should most likely be in a regular insured savings account.
 

An IRA is not a kind of fund, but a type of savings vehicle.  Basically, an IRA is a *way* to save, not a type of savings.  So, in your IRA you could have anything from very risky stocks to government bonds to a simple money market account.  If you're going to be considering it an emergency fund, you would probably want to invest more heavily in bonds & cash items than you would in traditional retirement savings (and then increase the amount you have in stocks/mutual funds/index funds as you have more than you would need in an emergency fund).

[EmsMom]

Originally Posted by TiredX2 

An IRA is not a kind of fund, but a type of savings vehicle.  Basically, an IRA is a *way* to save, not a type of savings.  So, in your IRA you could have anything from very risky stocks to government bonds to a simple money market account.  If you're going to be considering it an emergency fund, you would probably want to invest more heavily in bonds & cash items than you would in traditional retirement savings (and then increase the amount you have in stocks/mutual funds/index funds as you have more than you would need in an emergency fund).

I did not know you could put money in money market accounts within the IRA.  That is a good opportunity to save on taxes, for sure.  However, if you are young and trying to build wealth (as opposed to preserving wealth) wouldn't this use of an IRA be a limitation?  You can only put in $5000 a year and it seems as just putting it in cash or money market is kind of a loss of opportunity.  For some, it would be a net loss because they do not make enough to pay fed income taxes and the money market funds I just looked at are paying less than ING or other online accounts.  However, I guess if you are putting an emergency fund together before starting retirement investing, this would seem to be a good way to do it as the funds could always be moved to other investments later.  And that would mean you could use the IRA opportunity while still saving an emergency fund.  Intriguing.  

[TiredX2]

Originally Posted by EmsMom 

I did not know you could put money in money market accounts within the IRA.  That is a good opportunity to save on taxes, for sure.  However, if you are young and trying to build wealth (as opposed to preserving wealth) wouldn't this use of an IRA be a limitation?  You can only put in $5000 a year and it seems as just putting it in cash or money market is kind of a loss of opportunity.  For some, it would be a net loss because they do not make enough to pay fed income taxes and the money market funds I just looked at are paying less than ING or other online accounts.  However, I guess if you are putting an emergency fund together before starting retirement investing, this would seem to be a good way to do it as the funds could always be moved to other investments later.  And that would mean you could use the IRA opportunity while still saving an emergency fund.  Intriguing.  

Yes, definately.  If you have the money to fully fund an IRA and have savings/investments outside of it you should put investments with high growth potential in the IRA.  If, instead, you're putting off saving for retirement until you have a certain amount in your emergency fund it might be a consideration to, instead, put your emergency fund into an IRA.  Hopefully, you'll be able to leave it there and that way you will have maximized your tax-advantaged savings for that year.

Of course, this is a hypothetical for me but it is, as you said, an intriguing idea.

[marsupial-mom]

We have enough to cover our expenses for at least a year.

[Apples12]

I don't have an "Emergency Fund" set up. I just have a regular run of the mill bank account that has money in it to pay whatever bills come my way.