How much in emergency fund?

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amother

OP ↓

Tue, Aug 20 2024, 12:32 pm

Finally getting around to investing our savings, and wondering how much I need to leave accessible. Is a month of expenses a fair amount? I plan to invest in a mutual fund (or 2) so it's not like that money will be totally inaccessible should we truly need it. And do people leave their emergency fund in a checking account? Open a high-yield savings for that?

We are a small young family and BH have parents that I believe could/would help us if we had a financial emergency c"v

amother

Banana

Tue, Aug 20 2024, 12:34 pm

The standard advice is 6 months I believe. If you lose your income, it can take a while to find a source of income again.

I keep a few months worth in a high yield savings account.

amother

Saddlebrown

Tue, Aug 20 2024, 12:34 pm

High yield savings
3-6 months

amother

Violet ↓

Tue, Aug 20 2024, 12:34 pm

Generally recommended is 3 to 6 months daily expenses.

amother

↑ Violet

Tue, Aug 20 2024, 12:35 pm

Technically it's a mathematical thing. You're weighing the difference in return rate between a mutual fund and a high-yield savings account. Then you're comparing that to the chance that you would be required to withdraw from the mutual funds on the low. Like I said, it's a math problem but one I could not possibly figure out.

amother

Quince

Tue, Aug 20 2024, 12:37 pm

My understanding is 6 months living expenses in a liquid'able state (so not like a retirement account where you get majorly penalized or that you can't take out asap).

Last edited by amother on Tue, Aug 20 2024, 4:02 pm; edited 1 time in total

amother

Ghostwhite

Tue, Aug 20 2024, 12:54 pm

1. 3-6 months of your basic expenses. So that's not how much you currently spend in a month, but rather, the amount you'd need for your basic needs.

2. This should not be in any sort of fund or investment. It should be entirely liquid. Which makes a high yield savings account your best choice.

Amarante

Tue, Aug 20 2024, 3:53 pm

The reason why you don't want to put your emergency savings in a mutual fund is because you might need the funds when the market is down and be forced to sell.

You put money in stocks (which is what most mutual funds are unless you purchase a bond fund) for longer or medium length goals and not for funds which you might need.

amother

↑ OP

Wed, Aug 21 2024, 5:52 am

thank you so much everyone!! That is very helpful, especially those who explained why it needs to be separate.
Anyone have a high-yield savings account to reccomend? Neither of the banks we currently have accounts in offer that.

camrygirl

Wed, Aug 21 2024, 7:00 am

amother OP wrote:

[quote]

We use wealthfront. It's very smooth and simple app. Fdic insured. From the highest rate right now. 5% apy. You can also use it to invest, and what I like is you can split the regular account, so I have one "bucket" for emergency, one for house... here's our referral if you want

Use this link to open a Wealthfront Cash Account. Once you fund it, you'll get a 0.50% APY boost! https://www.wealthfront.com/c/.....-8JGP

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