Emergency fund absurdity

jimjames

Reaper wrote: »

I agree with the OP the emergency fund idea can be overdone.

I think that's an important point. An emergency fund needs to cover a decent amount for emergencies. It doesn't mean you need to hold £100,000 in cash savings and zero in any other assets over the long term.

lippy1923

Perhaps someone may have poor credit and cannot get access to 0% credit or even any credit at all. Perhaps they are on low income and cannot afford to get every insurance available to man.
Perhaps they have lost their job in the past and it's taken 6+ months to secure another so like to have 3-6 months expenses in available cash for future.
Perhaps they need the cash to sleep soundly at night. Who knows!

System

Bowl - I will build up a flex saver thing as that'd be hard to safely beat. I would avoid selling in a crash with a passion, I believe regulation, fear, and lack of reward is why insurers don't invest too aggressively. I will do anything to work while I need the money. A weaker small performance hopefully portends a period of better growth just as now currency will probably go against me, it should all average out.

TheTracker

It has always seemed to me that one would need to possess a particularly fragile mindset to have to consign emergency planning to to buckets like 'cash' and 'investment'. When I've encountered 'emergencies' with a financial bent I've always liquidated investment funds to cover gaps, with credit to cover the immediate days. Forgoing long term average returns to keep some cash under the mattress seems odd. And it's more convenient to sell some trading account funds than reduce my high interest cash accounts. That said, I've plenty enough net worth to deal with all but the very worst of emergencies that might befall me. Perhaps it's easier for me as the illusory smoke of 'income/dividend' benefit dissipated long ago. In the end all you need, in your personal circumstances, is to model what you'd do in a range of emergencies and be comfortable psychologically with those actions.

InclusiveNeil

For people living month to month, emergency funds are super important. If you already have your whole month planned out, and something comes up, how else to deal with it?

Also, regarding selling investments- you have to keep in mind the tax burden and the fact that the timing of your emergency may also be the worst time to sell an investment.