Where are you storing your emergency fund money?

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TheQuestionGuy
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Where are you storing your emergency fund money?

Post by TheQuestionGuy »

Have been keeping the emergency funds in standard savings account primarily to ensure its readily available but looking back at the $100 interest it has earned in the past 5 years, and now thinking there has got to be a better place.

Have checked CDs, but for what little interest they earn, it didn't seem beneficial to have that money "locked up".
Possibly doing a ladder configuration with the CDs could work by leaving some money availalbe, but still the potential of having the money "locked up".

What is the general consensus on where to keep ones emergency cash knowing it needs to be readily available in well.....an emergency?
johnrbain
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Re: Where are you storing your emergency fund money?

Post by johnrbain »

I've got the same problem. I'm thinking seriously about the Vanguard Ginny Mae fund.
Charon
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Re: Where are you storing your emergency fund money?

Post by Charon »

I use a CD at my credit union, in part precisely because it's mildly locked up. I shouldn't be accessing the money if it's not an emergency, so the small penalty to break the CD is a good incentive not to touch the money unless I really need to. (Do, of course, make sure you can break the CD - I've never had one I couldn't, but it's worth checking what the penalty is.)
Marseille07
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Re: Where are you storing your emergency fund money?

Post by Marseille07 »

Really depends on how much EF and your liquidity needs. Can you pay your CC from savings? Might be possible but I haven't really explored it as I've always paid off from checking.
RJC
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Re: Where are you storing your emergency fund money?

Post by RJC »

We have ours in a high yield savings account although it's only like 0.45% now (Barclays).
armeliusc
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Re: Where are you storing your emergency fund money?

Post by armeliusc »

Series I Saving Bond: inflation protected.
Charon
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Re: Where are you storing your emergency fund money?

Post by Charon »

And of course remember what the point of the fund is - it's an emergency fund. So stability and accessibility of the money are the prime goals. Keeping up with inflation is a secondary goal (so I-bonds that are over a year old can be a decent emergency fund as well, but they're not accessible in that first year). Just remind yourself that getting a decent return isn't a goal at all.
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jakehefty17
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Re: Where are you storing your emergency fund money?

Post by jakehefty17 »

I'd suggest an online savings account or perhaps a no-penalty CD.

I use Ally bank, which is a good option at 0.50% interest. They stay competitive (not always best) with their rates overall which I like.

Right now "safe" money isn't going to generate much in returns due to interest rates. Hopefully rates come back up soon, but as Charon mentions... "remind yourself that getting a decent return isn't a goal at all."
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bugleheadd
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Re: Where are you storing your emergency fund money?

Post by bugleheadd »

investing it in my roth using the megabackdoor
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TheQuestionGuy
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Re: Where are you storing your emergency fund money?

Post by TheQuestionGuy »

Charon wrote: Fri Dec 18, 2020 11:28 am Just remind yourself that getting a decent return isn't a goal at all.
Words of wisdom.
Thanks for the reminder.
Now I don't feel as bad. :sharebeer
Unhandled
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Re: Where are you storing your emergency fund money?

Post by Unhandled »

I have a high risk tolerance. My emergency fund is:

25% -- Regular Savings Account (%0.20 APR)
37.5% -- Vanguard LifeStrategy Conservative Growth Fund
37.5% -- Vanguard Balanced Index Fund

Taken together, the two vanguard funds average to a 50/50 stock/bond allocation.
SundayMorning
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Re: Where are you storing your emergency fund money?

Post by SundayMorning »

100% Bitcoin. I will time my emergencies for up days. :twisted:

Actually, I gave up chasing yield on emergency funds a few years ago. My strategy is:
1. 2 months expenses in main checking
2. 6 months expenses in online savings account
3. If more is needed, tap the Taxable Brokerage account

I used to hop around chasing highest rate CDs and liquid accounts. Got tired of it and decided to simplify.
Do not recall ever having an emergency. Most lumpy expenses outside of the core monthly expenses
are planned for and reserve funded in advance of payment in the online savings account.
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vitaflo
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Re: Where are you storing your emergency fund money?

Post by vitaflo »

Limited-Term Tax-Exempt Muni's.
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Re: Where are you storing your emergency fund money?

Post by pasadena »

SundayMorning wrote: Fri Dec 18, 2020 12:05 pm Actually, I gave up chasing yield on emergency funds a few years ago. My strategy is:
Me too. I keep it at Vanguard, in VMRXX (money market). Currently very bad in terms of yield, but moving it to chase yields isn't worth the hassle. Moving it to Ally would bring in about $120 more a year, at today's rates *yawn*. I enjoy the simplicity.
pedalman701
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Re: Where are you storing your emergency fund money?

Post by pedalman701 »

Also using Ally for emergency fund via HY savings and their No-Penalty CD. Liquidity is the key.
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IMhooked
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Re: Where are you storing your emergency fund money?

Post by IMhooked »

Online Savings at Marcus with an attitude towards that money that it's job is not to grow substantially, but to be adequate and available in time of need.

Enjoy having it as a part of a solid foundation that facilitates confidence needed to consistently invest other monies according to our overall plan.

Our emergency fund has an important role. I'm not trying to give it two jobs as it might just do neither adequately! :beer
tashnewbie
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Re: Where are you storing your emergency fund money?

Post by tashnewbie »

Sounds like you use a local brick and mortar bank savings account.

You could probably get a little better yield at an online "high" yield savings account, such as Ally, Capital One, Barclays, etc. The difference in yield won't knock your socks off nowadays. But in other times, the difference can be significant (that is relative...depends on who you ask).

I use a combo of CDs and a local credit union (5% APY on a balance up to $10k if I have certain direct deposits, and .5% after that. That .5% is about market rate now).

Agree with others that said the purpose of an EF/cash reserves isn't yield; it's security.
btenny
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Re: Where are you storing your emergency fund money?

Post by btenny »

I keep a lot of money in VWIUX (Vanguard Tax Free Muni bond) in my taxable brokerage account. This is my emergency fund and several years spending money if the market tanks. Right now it is paying 2.5% interest. It is readily available and creates no tax event to sell. It is very safe. I also keep this years spending money in cash and one years money in BIL (short term treasury) in taxable as well.

Good Luck.
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chickadee
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Re: Where are you storing your emergency fund money?

Post by chickadee »

btenny wrote: Fri Dec 18, 2020 12:18 pm I keep a lot of money in VWIUX (Vanguard Tax Free Muni bond) in my taxable brokerage account. This is my emergency fund and several years spending money if the market tanks. Right now it is paying 2.5% interest. It is readily available and creates no tax event to sell. It is very safe. I also keep this
How is Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) getting 2.5% interest?

On the page below, the 30 day SEC yield is 95% and the Yield to Maturity is 1%.

Where do I find the 2.5% interest you quoted on the website?

https://investor.vanguard.com/mutual-fu ... view/vwiux
Dandy
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Re: Where are you storing your emergency fund money?

Post by Dandy »

The purpose of an E fund is to be there when you need it. It rarely keeps up with inflation and usually doesn't add much to your growth -- especially now. Safety and liquidity are the main focus -- at least to me. So Savings, CDs, money markets, legacy EE bonds and having a HELOC and credit cards to make sure enough liquidity is always there for almost any emergency. In a really bad emergency all your assets may have to be on call.
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Re: Where are you storing your emergency fund money?

Post by btenny »

Chick.

Vanguard only posts face value interest on the bonds in a fund. But Vanguard bond funds have turnover of bonds (8% in this case) and earn money as cap gains on a yearly basis. Plus bonds have been going up in price for a long time. Some of this gain is distributed monthly as cash dividends. In the case of VWIUX it is currently paying out 2.5%. Go look at the distributions. This earning more has been going on for decades.
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Re: Where are you storing your emergency fund money?

Post by HawkeyePierce »

For the moment I'm still using no-penalty CDs at Ally, but as they mature I'll need to find a new place for them. I don't like Ally's recent change requiring a phone call to break the CD.
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Re: Where are you storing your emergency fund money?

Post by Toons »

Vanguard Intermediate Term Tax Exempt

:mrgreen:
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Re: Where are you storing your emergency fund money?

Post by Hector »

I don't have a separate emergency fund. Two main buckets: stock and bond. The plan is to sell bonds for emergency.
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willthrill81
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Re: Where are you storing your emergency fund money?

Post by willthrill81 »

Back when we still had an EF, we kept 1/3 in hard cash and 2/3 in Wellesley Income in a Roth IRA.
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Re: Where are you storing your emergency fund money?

Post by Monsterflockster »

willthrill81 wrote: Fri Dec 18, 2020 3:46 pm Back when we still had an EF, we kept 1/3 in hard cash and 2/3 in Wellesley Income in a Roth IRA.
We do something similar. We have a separate taxable account specifically earmarked for our emergency fund. Have 75% cash in the money market, 25% in VTI. That does better than a high yield savings and the hope is that the 75% would have enough for most emergencies.
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Re: Where are you storing your emergency fund money?

Post by willthrill81 »

Monsterflockster wrote: Fri Dec 18, 2020 4:18 pm
willthrill81 wrote: Fri Dec 18, 2020 3:46 pm Back when we still had an EF, we kept 1/3 in hard cash and 2/3 in Wellesley Income in a Roth IRA.
We do something similar. We have a separate taxable account specifically earmarked for our emergency fund. Have 75% cash in the money market, 25% in VTI. That does better than a high yield savings and the hope is that the 75% would have enough for most emergencies.
Somewhat 'overfunding' your EF allows you to invest your EF in a conservative AA that is likely to outpace the negative real yields of savings accounts and bonds today. This thread details how this works.
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Re: Where are you storing your emergency fund money?

Post by Jack FFR1846 »

About $100k in 0.5% bank/credit union accounts. $387k in US Savings Bonds.
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Re: Where are you storing your emergency fund money?

Post by Pizza_and_Beer »

Series I US Savings Bonds
DesertResister
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Re: Where are you storing your emergency fund money?

Post by DesertResister »

armeliusc wrote: Fri Dec 18, 2020 11:27 am Series I Saving Bond: inflation protected.
+1
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Re: Where are you storing your emergency fund money?

Post by pseudoiterative »

Charon wrote: Fri Dec 18, 2020 11:28 am remember what the point of the fund is - it's an emergency fund. So stability and accessibility of the money are the prime goals.
Ideally an emergency fund could have different points of failure to your other financial assets, to decorrelate risks. The main reason for an emergency fund is for individual emergencies (losing your phone, losing your house and possessions in a fire, unexpected medical expenses that need to be paid right now), but some emergencies to consider are less individual and more exotic systemic risks.

Possible emergencies:
  • your phone and wallet get lost, stolen or destroyed -- you might want to avoid using your mobile phone to provide 2FA for access to your standard financial assets and your emergency fund
  • you lose your house and all possessions stored in your house in a fire -- you might want to ensure credentials to access your emergency fund does not crucially depend upon anything stored in your house
  • you lose access to your primary transaction account (e.g. your bank falsely concludes you are at high risk of violating international sanctions about financial transactions with prohibited countries/entities and freezes access to all your accounts) -- you might want to place your emergency fund with a different financial institution to all your other funds
  • in the event of some kind of huge systemic currency disaster -- you might want to have some or all of your emergency fund in different currencies / different countries to the majority of your assets
  • in the event that there's a panic about a currency collapse and banks freeze or restrict withdrawals -- you might want to have some of your emergency fund in cash under the mattress or physical gold, not held by intermediaries
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Re: Where are you storing your emergency fund money?

Post by nolesrule »

I don't know where I keep my Emergency Fund. I have various checking, savings, CDs, I Bonds, brokerage holding stocks. When an emergency arises I'll pick from the best withdrawal option at the time.
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Re: Where are you storing your emergency fund money?

Post by abuss368 »

I simply use a money market fund in an account by itself at Vanguard.

I look at safety first and return as second for cash.
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Re: Where are you storing your emergency fund money?

Post by Nicolas »

Mine is in a high-yield savings account at Synchrony Bank. Not so high of a yield right now but it’s right up there with the competition, though still losing to inflation, sadly. FDIC insured.
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Re: Where are you storing your emergency fund money?

Post by Magruder »

Under the silverware tray in the kitchen.
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bengal22
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Re: Where are you storing your emergency fund money?

Post by bengal22 »

My whole portfolio can be used as an emergency fund. I can have cash within a day. Plus I have a credit card. Don't get emergency funds.
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twentyone
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Re: Where are you storing your emergency fund money?

Post by twentyone »

Thoughts on PTTRX? Seems to have traded within a ~10% range over the course of its history and currently yielding ~3%. Obviously more principal risk than what I’d typically assume for EF but maybe worth it in the current environment?
Last edited by twentyone on Fri Dec 18, 2020 6:09 pm, edited 1 time in total.
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Re: Where are you storing your emergency fund money?

Post by Broken Man 1999 »

bengal22 wrote: Fri Dec 18, 2020 5:34 pm My whole portfolio can be used as an emergency fund. I can have cash within a day. Plus I have a credit card. Don't get emergency funds.
Well, I agree an emergency fund isn't needed by many, including myself and DW. I also see our portfolio as just a large pool of assets that can be used to cover pretty much everything, if needed.

But, a person/couple just starting out might be wise to set aside some funds for an emergency. If they are just starting out, they probably have very little in terms of investments that could be used, unlike a retiree who might have substantial investments.

Today, if I needed a large sum of money, I would sell some of our equity holdings, as they are reaching ATHs just about every day or so. Or, I could simply write a check using my Short-term Treasury Index mutual fund if our equity holdings were down substantially.

Thing is, an emergency for us might be personal, uncaused by the market.

If my need was less than $15K, I could borrow from a one of our DDs. They might charge a high interest rate, though.

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Marseille07
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Re: Where are you storing your emergency fund money?

Post by Marseille07 »

bengal22 wrote: Fri Dec 18, 2020 5:34 pm My whole portfolio can be used as an emergency fund. I can have cash within a day. Plus I have a credit card. Don't get emergency funds.
Using CCs would be a given. But those CCs have to be paid back, that's where EF is used.
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Re: Where are you storing your emergency fund money?

Post by flah »

DesertResister wrote: Fri Dec 18, 2020 4:49 pm
armeliusc wrote: Fri Dec 18, 2020 11:27 am Series I Saving Bond: inflation protected.
+1
+1 also because the income tax on the interest can be deferred and is not subject to state / local taxes.
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Re: Where are you storing your emergency fund money?

Post by willthrill81 »

Marseille07 wrote: Fri Dec 18, 2020 6:01 pm
bengal22 wrote: Fri Dec 18, 2020 5:34 pm My whole portfolio can be used as an emergency fund. I can have cash within a day. Plus I have a credit card. Don't get emergency funds.
Using CCs would be a given. But those CCs have to be paid back, that's where EF is used.
Investors need to plan for how to handle financial emergencies. For many, that involves the use of an EF. But for many others, it does not.

Personally, this is an area where I think that many BHs are simply overly pessimistic. Yes, it's possible that both you and your spouse will lose your jobs on the same day that your house burns down, you have a big out-of-pocket medical bill, stocks are down -50% from their all-time highs, etc., but how likely is such a perfect storm to happen to you? Some argue that any likelihood of that happening warrants a 24 month EF, but that ignores the reality that there is no guarantee that any amount of funds will be enough to cover everything that could ever happen. Like it or not, we're all playing the odds to some extent.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Where are you storing your emergency fund money?

Post by Cheez-It Guy »

Marseille07 wrote: Fri Dec 18, 2020 11:26 am Really depends on how much EF and your liquidity needs. Can you pay your CC from savings? Might be possible but I haven't really explored it as I've always paid off from checking.
You can. I do. Marcus Savings auto draft.
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Re: Where are you storing your emergency fund money?

Post by JHU ALmuni »

BTC and top altcoins, up 5x in the past few months :sharebeer
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Re: Where are you storing your emergency fund money?

Post by JoMoney »

I keep a small around of physical cash around in case the power/credit-card network is out or other urgent need.
I have a good amount of cash in a bank account earning next to nothing, but I also have a credit card that earns me tax-free bonus rebate money on spending.
I cram as much as I can into Series I Savings Bonds.
I've been trying to raise my allocation to fixed income, and all of my new contributions have been going into a "stable value fund" in my workplace 401k (earns about 2%, not available outside the plan)... it would be a pain to get to this money in an "emergency" but the plan does allow for personal loans.
The bulk of my investment portfolio is in rollover IRA/Roth accounts in a low-cost S&P 500 fund. If I really needed to, a very large amount of the roth money is considered contributions that could be withdrawn, and I could setup a "roth ira conversion ladder" to start making early withdrawals of the other IRA money with a 5 year buffer.
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Re: Where are you storing your emergency fund money?

Post by Marseille07 »

Cheez-It Guy wrote: Fri Dec 18, 2020 6:15 pm
Marseille07 wrote: Fri Dec 18, 2020 11:26 am Really depends on how much EF and your liquidity needs. Can you pay your CC from savings? Might be possible but I haven't really explored it as I've always paid off from checking.
You can. I do. Marcus Savings auto draft.
Thank you. That's good to know. Savings are quite useful, esp. without that 6-times-a-month ACH thing that's not enforced currently due to covid.
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Re: Where are you storing your emergency fund money?

Post by Marseille07 »

willthrill81 wrote: Fri Dec 18, 2020 6:12 pm
Marseille07 wrote: Fri Dec 18, 2020 6:01 pm
bengal22 wrote: Fri Dec 18, 2020 5:34 pm My whole portfolio can be used as an emergency fund. I can have cash within a day. Plus I have a credit card. Don't get emergency funds.
Using CCs would be a given. But those CCs have to be paid back, that's where EF is used.
Investors need to plan for how to handle financial emergencies. For many, that involves the use of an EF. But for many others, it does not.

Personally, this is an area where I think that many BHs are simply overly pessimistic. Yes, it's possible that both you and your spouse will lose your jobs on the same day that your house burns down, you have a big out-of-pocket medical bill, stocks are down -50% from their all-time highs, etc., but how likely is such a perfect storm to happen to you? Some argue that any likelihood of that happening warrants a 24 month EF, but that ignores the reality that there is no guarantee that any amount of funds will be enough to cover everything that could ever happen. Like it or not, we're all playing the odds to some extent.
Personally I don't think you have to account for all the worst case scenarios that can possibly happen and have EF for them. EF is used for immediate cash needs (i'd say up to a month, maybe two). This is why I keep on talking about the 20K number, as that's enough to cover luxurious trips and most unexpected items without slashing your AA.

Expected expenses, such as purchasing a car, a house down payment etc etc should be budgeted via other means, not EF.
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Re: Where are you storing your emergency fund money?

Post by abuss368 »

To clarify I don’t have a separate “emergency fund”. I have one simple money market at Vanguard with just cash. That is the only cash account.
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Re: Where are you storing your emergency fund money?

Post by ccf »

I try to keep 6 months expenses fairly liquid. I had it in an 11 month Ally No Penalty CD.

It was up this week and now I just have cash in Ally and don't know what to do with it, if anything. I'll probably just leave it there.
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Re: Where are you storing your emergency fund money?

Post by livesoft »

Just put it into VTSAX or VTI. If you think stocks are risky (as you should, since they are) and can drop 50%, then just double the size of your emergency fund to take care of that contingency. Say you want one year of expenses in your emergency fund, then put 2 years of expenses into VTI. What, like it's hard?
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Re: Where are you storing your emergency fund money?

Post by scrabbler1 »

I have two main tiers for EF money, as others here have. The first tier is my local bank's checking account which has about $700 over its minimum balance to avoid monthly fees. That can be used in case I have small, unforeseen expenses I need to pay immediately, something which happens fairly often. The second tier is about $40k in an intermediate-term muni bond fund which has checkwriting privileges. The checkwriting is crucial because it gives me some added liquidity should I need to pay a larger, unforeseen expense right away which the local bank's balance can't cover. This account pays monthly dividends, mostly tax-free in the 2%-2,5% range, as I don't like tying up any big chunk of money earning zilch or nearly zilch. I don't mind risking some loss in principal if I have to sell from that fund because it earns some money every month. In the 26 years I have been in this fund, I have averaged less than 1 redemption per year and have broken even with them overall.
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