Emergency Fund

lacticacid · #1 03-28-2006, 04:35 PM

Where does everyone put their money set aside as an emergency fund?

Right now I've got it sitting in a low-interest savings account which is sort of retarded. So I'm planning on moving it to either an ING, HSBC, or Emigrants direct account. Putting all of it in one of these accounts seams a little conservative as well.

Would putting the first 5k in a money market account and then the rest in something like the Vanguard Target 2005 or some other lower risk fund. Right now the money I'd be looking to invest in a fund would be about 5k and I'd be adding to it monthly until it was 10k.

Thanks.

ElaineMonster · #2 03-28-2006, 05:02 PM

ING. Our goal is 6 months worth of expenses. If 10k is enough for you for 6 months, cool.

Some people say you don't need cash, just access to quick money like credit cards and such. I think that's BS and I won't feel comfortable til we have the cash. But yeah, I'm conservative that way. (With reason: Both Ed's parents lost everything in Katrina and my grandma is still nutso due to the Depression).

lacticacid · #3 03-28-2006, 05:40 PM

[ QUOTE ]
ING. Our goal is 6 months worth of expenses. If 10k is enough for you for 6 months, cool.

Some people say you don't need cash, just access to quick money like credit cards and such. I think that's BS and I won't feel comfortable til we have the cash. But yeah, I'm conservative that way. (With reason: Both Ed's parents lost everything in Katrina and my grandma is still nutso due to the Depression).

[/ QUOTE ]

I probably should have worded it better. The goal is 6 months of expenses.

5k in Money Market
10k in a low risk fund.

Just trying to figure out if that is better then 15k in ING/HSBC/Etc.

Thanks.

Sniper · #4 03-28-2006, 06:11 PM

The answer really depends on what "emergencies" you are trying to protect against, the likelihood of those events occurring, and the time frame in which they might occur.

In general, its my personal opinion, that for a young person with a steady income stream to stick the majority of their net worth in low interest accounts of any type, is way too conservative.

alekhine8 · #5 03-28-2006, 10:50 PM

I have my emergency fund at Vanguard in their Prime Money Market Fund (VMMXX) which is paying 4.45%. This will creep up with the fed raising rates today as their holdings expire, as they usually have average maturities of 35-40 days. They have minimums to start at $3,000 with incremental additioons to that of $100 or more. It pays comparably or maybe a little higher than most of the online banks - that 4.45% rate is not some 90-day promo rate or anything like that. And it links to your bank account and all that standard junk.

I know some people think cash stashes are dumb, but it all just depends on your personal situation and risk tolerance. My wife and I have a newborn and she won't be going back to work. I feel a lot better knowing we have 9-12 months saved up in case something happens with my health or job or anything else crazy. If you are on your own with no dependents, relying on a home equity line or credit cards is probably fine.

Either way, the other benefit I see is that I am putting any excess money I get (IRA/401k/anything else) straight into 100% stock. Maybe my logic is hypocritical or whatever, but I feel if I am covered near-term for anything with my cash, I can be aggressive with my fund allocation for retirement.

KKrAAAzy88s · #6 03-29-2006, 01:25 PM

i have my savings at HSBC - 4.80% at the moment, but i chose them b/c i have a branch with ATM 2 blocks away in case i ever need to hit up that emergency fund rather than waiting. could be potentially bad since it's too available. [img]/images/graemlins/cool.gif[/img]