Comments on: Automate Your Emergency Savings http://www.consumerismcommentary.com/automate-your-emergency-savings/ A premier personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Thu, 24 May 2012 19:20:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Flexo http://www.consumerismcommentary.com/automate-your-emergency-savings/comment-page-1/#comment-58913 Flexo Wed, 30 Aug 2006 15:15:30 +0000 http://www.consumerismcommentary.com/2006/08/29/automate-your-emergency-savings/#comment-58913 The slight difference is that the cash will be outside of the ordinary, daily use account. It's a matter of temptation for some people, and I would think that different people have different levels of resistance to temptation. That's the reason for not leaving the funds in an almost-perfectly liquid account. It's great to have friends and family to help you out in the case of an emergency. Not everyone has or would want to use those resources... and available credit can be an expensive proposition for some people, especially in an emergency with an undefined ending point. If you have $10k invested at 5% instead of in the market at 8-10%, it's a guaranteed opportunity cost of at least 3%. If you end up in an emergency and using available credit for that 10k, it's at a cost of your home equity interest rate, or worse, a credit card interest rate. There's no one-size-fits-all solution. Personally, in an emergency, I can call on my cash, which will probably cover about 3 months or more if I reduce expenses. If I need more, I can tap into my Roth IRA contributions, though I'd rather not. Credit cards and taking money from friends or family would be the last option on my list. It's a personal choice. The slight difference is that the cash will be outside of the ordinary, daily use account. It’s a matter of temptation for some people, and I would think that different people have different levels of resistance to temptation. That’s the reason for not leaving the funds in an almost-perfectly liquid account.

It’s great to have friends and family to help you out in the case of an emergency. Not everyone has or would want to use those resources… and available credit can be an expensive proposition for some people, especially in an emergency with an undefined ending point.

If you have $10k invested at 5% instead of in the market at 8-10%, it’s a guaranteed opportunity cost of at least 3%. If you end up in an emergency and using available credit for that 10k, it’s at a cost of your home equity interest rate, or worse, a credit card interest rate.

There’s no one-size-fits-all solution. Personally, in an emergency, I can call on my cash, which will probably cover about 3 months or more if I reduce expenses.

If I need more, I can tap into my Roth IRA contributions, though I’d rather not. Credit cards and taking money from friends or family would be the last option on my list. It’s a personal choice.

]]> By: brett http://www.consumerismcommentary.com/automate-your-emergency-savings/comment-page-1/#comment-58912 brett Wed, 30 Aug 2006 15:02:48 +0000 http://www.consumerismcommentary.com/2006/08/29/automate-your-emergency-savings/#comment-58912 How the heck can something be LIQUID enough to be considered an emergency account, but be ILLIQUID enough to not "be easily accessed by checks, debit cards, and ATMs"? With on-line banking the difference between a savings account and an ATM machine is a click away. I've never understood the point of an emergency account and I don't maintain one. In a true emergency I would call upon friends, family, employer, and available credit to help me out -- not on some $10K-$20K that I've kept inefficiently invested forever. How the heck can something be LIQUID enough to be considered an emergency account, but be ILLIQUID enough to not “be easily accessed by checks, debit cards, and ATMs”? With on-line banking the difference between a savings account and an ATM machine is a click away.

I’ve never understood the point of an emergency account and I don’t maintain one.

In a true emergency I would call upon friends, family, employer, and available credit to help me out — not on some $10K-$20K that I’ve kept inefficiently invested forever.

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