Building An Emergency Fund – Where Do I Keep It?
As I mentioned in my recent post about what to do after getting out of debt, I like the idea of having an emergency fund. After a series of super-secret mathematical calculations – I pulled a number from a hat – and decided that $16,000 would be a good amount to have in ours.
Where do I keep our emergency fund?
Online Savings Account – $14,000
Online Interest Bearing Checking Account – $1,500
Cash In My Pocket – $500
(Currently, our online savings account is with ING DIRECT. Open your account online today. No fees and no minimums!)
I like the idea of having some cash on me, at all times. I also like to keep some money in a checking account, readily accessible for unexpected expenses. The bulk of the money, in my online savings account, is for major, unforeseen life-events. Should I need to withdraw the money, a transfer takes about two days.
(As a side note – I also have just about $2,000 in a brokerage account, invested in an index fund. The money has been sitting in the account for more than two years and I never really do anything with it. Eventually, after I fully-fund my ‘emergency fund’ and all retirement accounts, I’ll turn my attention to this brokerage account. For now, I don’t include this amount in any of my calculations – and I consider it my super-secret, things-have-fallen-apart, emergency stash.)
Observant readers will remember that I’m not afraid to dip into my emergency fund. In fact, if you are going to live ‘no credit needed’ (without borrowing money), then you’ll need an above-average cash reserve. And, when it’s time to buy big-ticket items, you’ll have to use the money that you have ‘on hand’.
I would be interested to hear whether or not you have / want an ‘emergency fund’. How much are you planing to save? Is it invested in mutual funds / stocks or is it just sitting in an online account?