I'm about down to 6k on total debt at the moment and should have that paid off within 2 months...

With that being said what is the best total amount for a 6 month emergency fund? And how much should be kept in cash?

Side notes : Own vehicles and rent house at the moment, looking to buy soon.

A year off.

That's how much cash you should keep in your emergency fund.

Probably should base it on your expected expenses for any 6 month period.

You don't have to keep any in cash, if you don't typically use cash for your expenses.  Lots of people don't use cash anymore.  I keep some cash, and tally it with my emergency funds because I know that I can often get better deals on vehicle or home repairs when paying with cash. But it's more of a convenience to save me a trip to the bank.

Now that I have a brokerage account, I'm keeping a large chunk of emergency funds in my money market to get a better return (than would get in savings account) while keeping it plenty liquid.

It really depends on your line of work. If you're in a field where it's relatively easy to be re-employed, like a Registered Nurse, 3 months. If you're an astronaut or a millennial, 6-10 months.

A 6 month emergency fund would usually be 6 months of your expenses, so it would vary person to person. And what do you mean by “cash”? Like literal $100 bills under the mattress? I wouldn’t keep much in actual cash, and would park it in a high yield savings account or something until you have an actual emergency. You should be able to get around 2% right now. It’s not much, but an emergency fund isn’t an investment, it’s insurance against emergencies.

You know that millennials are pushing 40 right? Lol

And cash means cash.  Not 010100101.

I like to keep $1000 in the safe. I don't like being under a months expenses in my checking account. I'm ok with investing the six months expenses as long as you understand the risks of the investment and it's immediately sellable for cash.  Beyond that I keep $100k of revolving credit available.

No, we're not. I believe I am of the first millennials and Im 33.

And I agree on the cash comment. Cash can be held in your hand. Not, funds in a bank account.

I try to keep anywhere from $5-10k cash on hand, if were talking cold hard cash. I know most think thats crazy, but we had a ridiculous storm roll through here about 6 years ago that knocked out the grid for a couple weeks. Cash sales only, everywhere. Gas, groceries etc. We were prepared and didn't need to buy anything, but it was an eye opener and now I advocate having ample cash on hand. No ATMs were up, not banks were open etc. What you had was all you had.

If were talking "cash" as in money in an account, minimum six months of bills and living expenses.

I try to keep about 10 years worth.

That's pushing towards 40 hahah.

This was my concern as well. Ice storm 2009 here killed all the local banks. No power and no power to data centers which meant no debit cards.

I hate to keep 5-10k on hand without a serious fireproof safe within a safe but it's the answer I was looking for.

If it gets to a point where you need to spend $10k cash during a crisis, you might as well go guns blazing, because the world is on fire.

Everyone has to asses their specific situation for the specific contingencies they may face.

Three levels of emergency funds, really.

1) held in readily liquidated non-retirement money in low volatility investments

2) held in dollars in savings or money-market account

3) held at home in cold hard cash

These tend to get conflated in these threads.

There are debatable rules of thumb for each. But, together, they add up to your emergency funds.

There are very few situations where I would need to spend that kind of money before ATM's and banks come back online.  Pretty much all of those situations would put me on orders anyways.

It's not like your going to bug out to another country on $10k in cash.  If things get where you need to start over, you need a lot more than $10k and it probably doesn't all need to be in cash.

Every dollar sitting in cash is losing value over the year. At least in a bank account you can earn most of the inflationary loss back.

Probably this.

Why cash?

What does it get you?

Most likely, to some place where you can reach back to your other money.

So, unless you’re seriously contemplating global, vice local, disaster, your cash in hand just has to get your from point A to point B; that amount will be based on where point A is, where point B is, how many people are relocating, and the means required to relocate.

My personal rule of thumb is two weeks living and traveling expenses. If I can’t get access to other funds by then, the situation is such that we’ve gone full Mad Max.

I would contend that the average American should put their emergency fund into their Roth IRA until they hit the point they can contribute more than the yearly Roth limits. It can sit in a money market account in the Roth. Then as your retirement savings increase and you're saving more for retirement than the Roth limits, you can contribute the excess to a bank account and roll the older Roth contributions to stocks and bonds. This will allow many people to contribute more to tax advantages accounts when they would otherwise be bouncing off the limits.

I'm also ok with holding some emergency money in stocks. Over 7 or so years, a broad market index fund is likely to double. While it does increase risk in some areas, over time it is likely to leave you with a larger asset pool that can be immediately liquidated for large emergencies. (I want to caveat this paragraph by pointing out that the current shiller  P/E indicates that the current time is a bad time to start this path. It makes more sense when dollar cost averaged over a long period of time.) This is where I would ride the six month+ money.

I think we are confusing three very different concepts.

1) retirement focused investing, often using vehicles for which there is a penalty for early withdrawal. I’m no financial advisor - but, short of medical emergency related expenses, Roth accounts have penalties for emergency withdrawals.

2) growth-focused investing which, while not simply focused on retirement, can and is often placed in volatile markets where short notice withdrawals can lead to forced loss taking.

3) emergency funds.

I would argue that, by definition, emergency funds are not investments; these should be treated differently.

In regards to 1, with a Roth account there is no penalty for withdrawing the contributions.  Growth cannot be withdrawn until you reach the age limits.

In regards to 2 and 3, the ultimate emergency fund is 25x+ annual expenses in investment accounts. So I blur the line a bit on the path.

I'm ok with having a section of invested assets dedicated to liquidation in the event of a large enough emergency.  I don't like money not being put to work as it gets expensive over time. If emergencies are far enough apart, growth can double or quadruple the amount available. If a personal emergency is compounded by a market downturn, you will have less available, but dollar cost averaging in greatly reduces that negative risk.

True large emergencies should be rare. Many of the largest risks should be covered by insurance.

When we start talking about how to fund a period of time greater than six months, I don't want that much sitting in cash. This is far past the level of many Americans who are living pay check to pay check and show up in articles without the ability to muster $500 without a credit card or selling something.

Its nice to have some cash on hand for times when a good deal comes along and the bank is closed due to weekend or holiday.

Used it twice recently, both times because the bank was closed.

There are a few exceptions, but a Roth IRA needs to be 5 years old before you can take the contributions penalty free. Just something to be aware of.

I can travel for work at a moments notice as well, and I went 14 days without power or access to funds before. Some areas went longer during the ice storm, for those who have been there they understand. Thread has gotten a little far out of the question for emergency funds, I plan on keeping 30k in the bank, and 5-10k in cash at home....

And for those who think bugging out to another country with 10k in cash hasn't happened, well it has.... for a work trip for a month. Cool pic for proof.

Attached File

You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA.

https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira/withdrawal_rules

You’re right, I was confusing 2 things.

I keep a years salary in a money market and about 10k in a bank savings acct, cash is looking better the more the fed raises rates

various forms of cash for emergency funds, my perspective:

Keep maybe $50 face value 90% silver (pre 1964 dimes, quarters, halves)
Keep about five one ounce gold coins
Keep about $5000 real cash in the form of the worthless paper money issued by the government that nearly everyone willingly takes in exchange for goods or services
Keep six months of essential expenses in digital form (money in the bank/money market/internet bank)

You do that, you should be fine

I can agree with this, and I understand the points other people are making. But the fact remains, if it comes to that and you've gone full mad max, I'd rather go full mad max with 10k then without.

As for what does cash get you? What doesnt cash get you?

I think this is solid advice, but even still, I would contend that if a situation arose where having 10k on hand suddenly became a great idea, the government would just as soon have siezed anything electronically accessible. 401ks and bank accounts are only safe until they are not. If anyone has any doubts about something like that I'd suggest looking up the Gold Reserve Act of 1934 or Executive Order 6102 in 1933. Or, just take a look into identity theft statistics across the country.

Ill bring up a couple more far more realistic situations than a madmax scenario.

1) IRS audit, all accounts are frozen until whenever the IRS decides they arent.
2) Divorce, similar scenario to the audit
2) Identity theft, bank account drained

As I've said earlier, 10k seems like a lot of money until its all you've got access to. I'd rather have and not need then need and not have.

I agree. I keep 6 month's expenses in a savings account foe emergency expenses. The actual amount in that account is determined by our monthly budget x 6. If we were to need that money in a longer term emergency it could be stretched much farther than 6 months since we won't be gong out or spending our fun money. Funds from this account can be transferred to my checking acct via our bank app in a few seconds if needed.

As for cash, I keep around $1k. I don't see any need for more cash. IMO, if the economy craves that bad, cash will be king for a very short time, then worthless. $1k will get us through any reasonable expenses during a longer power outage due to a hurricane, etc. Honestly it's really for oopportunities to take aadvantage of great for sales when you might need cash fast. Even after hurricanes we haven't needed any cash as we are pretty self sufficient.

The rest of our money is invested and could be liquidated in a couple days, but I can't think of any reason I'd ever need to.

ETA: I do have a few hundred euros in the safe for places that won't take my corporate card on work travel.

are you asking how much should you keep in physical cash stored in your home? or just in cash in a bank account?

anywhere between 6 months and 1 year's worth of monthly expenses is cash is a good threshhold.

anymore than about a grand in physical cash on hand isn't worth the trouble in my opinion.

It's relative. To someone making millions a year $50k is nothing. You blow that kind of cash at the casino.

For the average Joe I'd want a couple thousand. There was that huge power failure in 2002 (I think) in the Michigan/Ohio/Pennsylvania/New York area for a week where no credit transactions could be processed. Once you spend a $100 on food, $50 on fuel, $50 on miscellaneous supplies, you're left with $800 for 5 nights hotel at $200/night. $1000 is not enough.

$2000 probably gets you by for a week. I also had to give some cash to my parents and brother who didn't have any at all.

Screw cash, just post date checks.

I think ROTH IRA allows you to withdraw what you put in (not the gains) five years after you open the account without penalty. its not really 5 years either because the clock starts on Jan1 for the tax year you made the initial investment.

I believe the way that works  for example is in march 2011 you contributed to a ROTH IRA for the 2010 tax year. In 2015 you can take out what you put in, without penalty. you just have to leave the profits there until 59.5

Someone correct me if i have that wrong, Im trying to learn.

Original contributions are immediately withdrawable with no penalty.  No 5 year line needs to be crossed.

https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira/withdrawal_rules

Mayne $1000 in cash in the safe, and 6 months of living expenses in savings/MM account.

My emergency fund is in an online savings account making 2%

I only keep $1,000.00 actual cash

Good post, but  sometimes you need cash right now.

4) Held in cash in the back of your wallet

Funny you posted this, as I just posted in this thread with a similar concern.

https://www.ar15.com/forums/general/How-much-cash-do-you-keep-on-yourself-/5-2176845/

I’m a bit amazed at how little cash some people carry on them.

I was thinking the same thing... $10k would prop me up with groceries and gas (really the only things I MUST buy locally) for a year or more.

I can't see needing that much cold hard cash unless you're the king of deal-shopping, and you want to keep that on-hand just in case you find an add on craigslist for a new car, priced very low that says "first cash takes it" and it's a weekend... haha

I actually really like this approach. You want have to be very careful implementing it in order to protect yourself from unnecessary risk, but it's very sound plan.

Think of it this way. The majority of people financially savvy enough and well-prepped, will likely never need their emergency fund, it's simply a safety net. If they do need it, the risk of them needing ALL of it TODAY is very negligible. So getting access to it, even if it's in a Roth, isn't that big of a deal. Keep some in immediately accessible "cash" (savings account plus a little at home in the safe), put the majority of that safety net in a Roth. If you never need it, you have a bigger nest-egg. If you do need it, the gains remain in the nest-egg while the contributions come to your aide, penalty-free.

I also think holding "some" (subjective amount) of the emergency fund in stocks or more risky investments is acceptable. As stated, the risk of needing it all immediately is low so you can likley wait out some small market blips. It's the large ones that are concerning. It would take a period of several years to grow the stock portion of the E-fund to the point that it could weather a serious down-turn and still maintain a larger balance than a savings account would have done. So how do you get from today, with no e-fund, to 7+ years from now without bearing unnecessary burdern? I'm curious to hear your thoughts on that.

My thoughts are a slow building-up and conversion process. Start out with bare minimum 2-month e-fund in liquid form (some cash at home, the rest cash in the bank). Then at some point as you keep building, start allocated more of the e-fund contributions to stocks instead of cash vehicles... In my ideal world, I would soon have an e-fund of 1 year of expenses, 1/3 cash, 2/3 stocks.

Of course, this is all somewhat moot if you have personal investments & savings outside of your retirement account.  I hold a few months expenses locally. Then I have personal investments that are some cash-type vehicles, some stocks. All in-total it probably equates to 3+ years of household expenses. If I have to live that one out life has seriously taken a turn for the worse...

You've got my wheels turning...

3-6 months in cash expenses is a minimum.
You need to be able to walk away from any job.  Period.