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Message
How to store emergency fund?
Posted on 7/29/14 at 12:57 pm
Posted on 7/29/14 at 12:57 pm
We have an emergency fund that is earning nothing in a savings account. We have $65k in there at the moment, but realize that is being conservative.
So I was going to put $20-25k in a total market fund that will be easy to convert to cash if necessary, but will still hopefully earn gains. How do I store the rest?
So I was going to put $20-25k in a total market fund that will be easy to convert to cash if necessary, but will still hopefully earn gains. How do I store the rest?
4
Posted on 7/29/14 at 1:05 pm to NOFOX
If you're going to put it in a fund make sure you accounting for inflation. For example, if you are earning 1% on the savings account and inflation is 3% then you are losing 2%. I have a money market fund through Ameriprise that consistently does 10% for me. I might be able to do better but it is consistent and stable. I also store a decent amount in gold and silver. I'm sure guys on here have more info that will help me as well. BTW, if it is an emergency fund make sure you always have some hard cash.
Posted on 7/29/14 at 1:08 pm to NOFOX
I wouldn't put any of your emergency savings in a total market fund.
You aren't just looking at earnings....you want to limit volatility with your e-savings. What you want is a bond heavy balanced fund.
VWINX is a good choice.
You also want to dollar cost average your way in, the buying rate determined by how secure you feel financially. The more secure, the faster you buy.
The reason for this for an emergency fund is because you need to have it in the market earning money to offset any losses that might be there when you actually need it.
Think something along the lines of ~20% per year.
FWIW, ideally you want to do this within a Roth, but I suspect you already have one and it would be problemmatic to shift that money into a Roth with the 5500/year limit.
You aren't just looking at earnings....you want to limit volatility with your e-savings. What you want is a bond heavy balanced fund.
VWINX is a good choice.
You also want to dollar cost average your way in, the buying rate determined by how secure you feel financially. The more secure, the faster you buy.
The reason for this for an emergency fund is because you need to have it in the market earning money to offset any losses that might be there when you actually need it.
Think something along the lines of ~20% per year.
FWIW, ideally you want to do this within a Roth, but I suspect you already have one and it would be problemmatic to shift that money into a Roth with the 5500/year limit.
Posted on 7/29/14 at 1:10 pm to jmarto1
quote:
I have a money market fund through Ameriprise that consistently does 10% for me.
Wat?
Posted on 7/29/14 at 1:12 pm to Volvagia
quote:
Wat?
i thought the same thing. how the hell do you get 10% in a money market?
Posted on 7/29/14 at 1:13 pm to jmarto1
quote:
BTW, if it is an emergency fund make sure you always have some hard cash.
I only keep a little over a thousand cash for my emergency fund.
I figure that is a sufficient enough number to last me till the wire gets in from the equity emergency fund. Personally don't see a point otherwise. I can take a 40% value downturn and still not see a loss on the principal. And 40% is unlikely as there is a significant bond presence in the allocation.
Posted on 7/29/14 at 1:15 pm to lsujro
In an interest rate environment where many MMs have folded. Not long ago I know Vanguard was eating a small loss on their MM accounts just to keep the contents from losing value.
Posted on 7/29/14 at 1:18 pm to lsujro
My bad, read the wrong line on all of my numbers.
Posted on 7/29/14 at 1:24 pm to Volvagia
Thanks for the advice. We are not eligble for Roth. Our true emergency fund is probably the $40k with another $25k I would like available, but willing to take more risk on it as long as I can liquidate it.
I will look into a more bond oriented fund like VWINX.
I will look into a more bond oriented fund like VWINX.
Posted on 7/29/14 at 2:13 pm to Volvagia
One more question. Does anyone use an all-in-one mortgage (US version of an offset mortgage account) to store some of their emergency fund?
My mortgage rate is pretty low, but obviously considerably higher than rates for savings account. I understand that I will have the issue of the liquid asset being reduced by inflation, but we can add to the account each year and have the ebenfit of reduced interest payments on the home.
My mortgage rate is pretty low, but obviously considerably higher than rates for savings account. I understand that I will have the issue of the liquid asset being reduced by inflation, but we can add to the account each year and have the ebenfit of reduced interest payments on the home.
Posted on 7/29/14 at 2:25 pm to NOFOX
quote:
We have $65k in there at the moment,
Holy donkey balls... talk about being conservative.
Well that is unless you are living the baller lifestyle.
I always read 6-12m of living expenses for the emergency account.
Posted on 7/29/14 at 9:38 pm to NOFOX
Why do you have 65k in an emergency fund? How big of an emergency are you anticipating?
I'd suggest keeping 25k in tgere and invest the rest.
I'd suggest keeping 25k in tgere and invest the rest.
Posted on 7/29/14 at 11:18 pm to TDsngumbo
It's not inconceivable that they are at 18 months of expenses.
Silly to question the amount without knowing the lifestyle, liabilities, and how risk adverse they are.
Silly to question the amount without knowing the lifestyle, liabilities, and how risk adverse they are.
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