According to this article over at Yahoo Finance -

Morgan Stanley told thousands of clients this week that they will not be allowed to withdraw money on their home-equity credit lines…

When things get tight, many people tap into their home-equity credit lines for a bit of extra cash.  But, what happens when the bank refuses to let them borrow any more money?  It looks like some Morgan Stanley customers are going to find out.

Personally, I don’t rely on credit.  Instead, I have cash set aside, in my emergency fund.  When life throws me a curve-ball, I’m ready for it.

Those of us who choose to keep a portion of our net worth tied up in cash are often criticised.  The critics ask, “Why don’t you put that money to work, instead of just letting it sit there?”.  I let it sit there because it provides security for my family.  I can get to it whenever I need it.  And, I don’t have to rely on a lender to bail me out of trouble.

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A month ago, I asked my readers to share their ideas about emergency funds, how much money it takes to cover 6 months worth of expenses, and the best place to stash emergency fund cash.  I’ve been amazed by the response to the poll.  More than 1000 readers have voted - and almost 50 left detailed answers in the comments section!

Here is a quick summary of the poll results, as of July 22, 2008.

For most folks, six months worth of expenses is somewhere between $8,000 and $25,000.  But, for many, their goal is more than $30,000!  That’s pretty interesting.

As for where to keep the emergecny fund, most opt for an online savings account, a few use a regular savings account, and still others use money market accounts from their local banks.

Because of the poll’s popularity, I’ve decided to keep it up for another month.  So, if you haven’t already, head over, cast your vote, and leave a comment.

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Many popular personal finance ‘gurus’ suggest maintaining an emergency fund with enough money to cover 6 months worth of expenses. I thought it might be interesting to see what my readers thought about this advice. If you are reading this post in a feed-reader, you will need to click through in order to leave a comment and vote in the poll.

Now that you’ve voted, a few questions -

Question 1: Where do you keep you emergency fund? In a savings account, money market, checking account, or under the mattress?

Question 2: What about six months worth of expenses? Is this too much… or too little?

Question 3: Would you sacrifice a fully-funded emergency fund in order to fully-fund a Roth IRA (or other retirement / education savings account)?

Question 4: What is the smallest emergency fund with which you wold be comfortable?

Thank you for your participation. Your answers will help me write a future post. If you are a blogger and you write a post about this subject, click the contact button at the top of this page and let me know about it. I’ll be more than happy to link to your post.

Related Posts -
Building An Emergency Fund - Where Do I Keep It?
Reader Poll - Short Term Savings
Updating My Non-Retirement Savings Chart

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One of my goals for 2008 is to rebuild my non-retirement savings. In 2007, we purchased a new-to-us minivan and in early 2008, we had a new baby (and purchased several baby-related items). These expenses worked together to dramatically reduce our non-retirement savings and I’ve been working diligently to rebuild them.

I just made a transfer from my primary checking account to my ING DIRECT Savings Account. My current balance now rests at $5,000. My goal for 2008 is $16,000. Bright readers who can quickly do math in their heads will have already calculated that $16,000 divided by 12 months is $1,333.33. So, after 5 months, I’m a little behind. O.K. I’m a lot behind. In fact, I’m $1,666.6 behind. But, alas, I have a plan!

In just a few weeks, I should receive my economic stimulus rebate check. The amount on the check will read $1,800. I’ll deposit the check and - abracadabra - I’ll be right back on track.

Click here to see my current savings chart over at the No Credit Needed Network - NCNSavings2008.

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My wife is an educator. She recently gave birth to our third child, a baby girl. Mommy and baby are doing great. Our older kids are adjusting and they are having so much fun, learning to feed and hold the new baby.

The timing of the birth worked out great. My wife will be home until school lets out in May - and she’ll be able to stay at home during the summer. Altogether, she’ll get more than 4 months with baby, before school starts back, next fall.

As you might imagine, due to the fact that she’ll miss the last few weeks of school, her paychecks over the next four months will be reduced. The actual amount of the reduction will be based on the number of sick days and personal leave days she had remaining, prior to the delivery, and the number of days she actually misses. Suffice to say, things will be a little ‘tight’ around the old NCN household, but we are prepared!

Why? Because, we have an emergency fund! With six months worth of expenses, set aside in our Orange Savings Account, we should be just fine.

Four years ago, when our son was born, we used credit cards to cover the gap between actual and expected income. But, not now. No, now we will use the funds in our savings account, to make up for the lost income. In fact, so far, we are doing just fine, living off of my income alone. But, should we need it, the money is there.

It’s amazing how much better we feel about our current situation, knowing that we have our emergency fund, and that it’s there if we need it. Plus, instead of worrying about paying back our creditors, we can focus on enjoying the new baby!

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