Emergency Savings Fund

[Ryan-o]

Where do most people keep their emergency savings fund?

Liquidity is obviously key, but with a 28 day buffer (credit cards), has anyone come across an option that can produce a yield on an emergency savings while still acting as a true EF?

I am exploring the option of Mango Money to park some (if not all) of my EF. (6% on first $5k saved when you ACH at least $50/month).

https://www.mangomoney.com/what-is-mango

 

[madage]

Where do most people keep their emergency savings fund?

Liquidity is obviously key, but with a 28 day buffer (credit cards), has anyone come across an option that can produce a yield on an emergency savings while still acting as a true EF?

I am exploring the option of Mango Money to park some (if not all) of my EF. (6% on first $5k saved when you ACH at least $50/month).

https://www.mangomoney.com/what-is-mango

Mango is pretty good. Have had an account there for 18 months or so. They no longer waive the monthly fee with DD, but it's still a great deal. ACH qualifies for DD, though some have had trouble linking their bank due to routing number not being recognized. I can tell you an ACH from Alliant CU works great.

 

[Therivler1]

if you do not fully fund your roth IRA, you may want to consider putting the money there. If you choose a balanced fund of 50% stocks/50% bonds, the chances of it being down when you need to withdraw are minimized. And with credit cards to tide you over, you can time the withdrawal a bit.

 

[Matt]

if you do not fully fund your roth IRA, you may want to consider putting the money there. If you choose a balanced fund of 50% stocks/50% bonds, the chances of it being down when you need to withdraw are minimized. And with credit cards to tide you over, you can time the withdrawal a bit.

Terrible financial advice. But you might get away with it EFs cannot be in the market, their purpose is to protect from needing to sell invested assets.

 

[Therivler1]

Advanced does not mean terrible.

http://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund

There was another interesting poll on bogleheads about actual usage of emergency funds. IIRC, something like half the respondents have never touched it their entire lives. I'll see if I can find it later.

 

[Matt]

Terrible still. There is a distinction to be made between the roth (good idea) and the asset allocation that involves stocks and bonds.

I do agree that EFs may be overplayed, but when they are needed, they need to be in cash/equivs.

I don't think everyone needs one, so doing stocks and bonds like you suggest isnt awful, but it needs to be known as a something different from an EF.

My reason for this is that people build other risk factors into their total financial profile, and when they do they often forget their EF isn't 'regular'. So there is an opportunity for a dire mistake with this strategy, that goes beyond the EF itself.

(PS I enjoy arguing)

 

[Alex1432]

I keep it in a local bank that paid 1.5 interest is I make ten debit transactions which I do by buying Amazon gift cards for one dollar.

It's comforting knowing that I can go there anytime and get a certified check for whatever comes up I don't have to wait for funds to clear then withdraw. But to each their own.

 

[StaticCharge]

I keep it in a local bank that paid 1.5 interest is I make ten debit transactions which I do by buying Amazon gift cards for one dollar.

It's comforting knowing that I can go there anytime and get a certified check for whatever comes up I don't have to wait for funds to clear then withdraw. But to each their own.

I split the difference: about 20% of our EF is in a local CU, so near immediate access to those funds is available; the balance is in an online savings account, so 2-3 business days to access it. Though I'm considering moving the 'net savings account into a rewards type acct like Mango, resisting because of the additional required transactions.

Totally different EF angle : does anyone deem it useful to keep more than a typical wallet-full of cash squirreled away? I'm thinking of a disaster situation where electronic access to any/everything may be temporarily compromised. I recall news coverage from western wildfires a year or so ago, and an interview with someone whose house had been lost, along with wallet/phone/computer, and local businesses were either inaccessible due to mandatory evacuation or operating off the grid. They managed to make do for a few days, food/hotel/transportation, with a cash stash of $1k (IIRC). Thoughts?

 

[R.R.]

does anyone deem it useful to keep more than a typical wallet-full of cash squirreled away? I'm thinking of a disaster situation where electronic access to any/everything may be temporarily compromised. I recall news coverage from western wildfires a year or so ago, and an interview with someone whose house had been lost, along with wallet/phone/computer, and local businesses were either inaccessible due to mandatory evacuation or operating off the grid. They managed to make do for a few days, food/hotel/transportation, with a cash stash of $1k (IIRC).

Yes -- I live in a western state afflicted by wildfires, though I'm in a city more likely to be afflicted by other kinds of outages, and I keep a stash in a fire-proof lockbox. Not saying exactly where, though ;-)

 

[StaticCharge]

Thanks for chiming in on the cash-on-hand option. I'm not gonna ask where yours is, or even what state, but what amount (min-max range?) would you think useful and why?

 

[R.R.]

Good question. I used to keep $1500 as a rule, but through usage and slacking off, I currently have less set aside. Maybe I should attend to that?

 

[StaticCharge]

Entirely your prerogative to prioritize "correcting" that amount, or not. I was just curious about the figure from someone who employs this type of fund. Thanks for sharing.

 

[R.R.]

Heh, really it was a question I've been asking myself lately, since "safety first" is one of my mottos.

 

[StaticCharge]

Well, then get to it?

 

[Matt]

Entirely your prerogative to prioritize "correcting" that amount, or not. I was just curious about the figure from someone who employs this type of fund. Thanks for sharing.

It's very relative though, you would have to factor in family size too.

This line of thinking is pretty much in survivalist territory rather than the more common Emergency Fund. In this sense you are using the money as a tool, and its value might change significantly also- as the supply/demand equation will be skewed hugely.

 

[StaticCharge]

With respect, can't the definition of emergency include survival (albeit temporary and with supply/demand pressure)? I didn't ask about stocking freeze-dried food, or gold, but the utility of stashing a portion (likely relatively small and commensurate with your perceived risk of disaster) of your EF in cash.

At least one person here thinks it worthwhile, and with reason (fire), so I don't think it should be dismissed blithely.

PS, I like to argue as well.

 

[Matt]

With respect, can't the definition of emergency include survival (albeit temporary and with supply/demand pressure)? I didn't ask about stocking freeze-dried food, or gold, but the utility of stashing a portion (likely relatively small and commensurate with your perceived risk of disaster) of your EF in cash.

At least one person here thinks it worthwhile, and with reason (fire), so I don't think it should be dismissed blithely.

PS, I like to argue as well.

I don't know where I was being blithe, I addressed the question and suggested that if you were planning to do this you should also consider family size and need. The reason for that is that it is a very much more immediate need. The notion of an EF is to cover living expenses to avoid the fire sale of assets.

If you were to equate that to this situation, that would mean if you had a bar of gold for (or maybe coins) for such an event, you would likely find yourself in fire sale territory - same could be said for cash, hence my supply/demand comment.

Let's take to an extreme - Zombie invasion, would your cash be sufficient to pay for an Uber ride outta town, or would the rate for that change significantly?

On a more realistic scenario, blackouts due to fire/whatnot occur, people run to the store to buy candles/batteries/etc. The demand shoots up, so your value diminishes.

As such, cash as an EF for disasters does have a place, but you need to be aware of its limitations. And it isn't the same as a regular EF concept, as the concentration of market (your neighborhood shops) means that the value of cash can fluctuate within that pocket of reality.

I'm not dismissing the idea, just suggesting that it might not play out as expected.

 

[Therivler1]

found it

As always, make sure you pass your own sleep at night test.

2/3 of respondents (n=126) have never used their emergency fund.

I have used my emergency fund for ...
http://www.bogleheads.org/forum/viewtopic.php?f=2&t=35769&view=viewpoll

 

[Therivler1]

I would further add that knowledge of manufactured spending greatly decreases the need for a full-blown cash cushion. The current environment may not continue forever, but with knowledge and planning, you can get set up your credit accounts to cover short term needs.

 

[LoveMountains]

I am using I-Bonds.
IMHO, it is not the best and not the worst approach.

 

[LoveMountains]

I would further add that knowledge of manufactured spending greatly decreases the need for a full-blown cash cushion. The current environment may not continue forever, but with knowledge and planning, you can get set up your credit accounts to cover short term needs.

Is not it the other way around? The fact that you are doing MS forces you to use your $$ as a cushion / float instead of storing them in some safe vehicle.

 

[madage]

Is not it the other way around? The fact that you are doing MS forces you to use your $$ as a cushion / float instead of storing them in some safe vehicle.

I make the argument most of the money in play with MS is from your credit lines. Depending on statement closing dates, it's fairly trivial to bounce a lot of credit from card to card while siphoning off cash that may be needed in an emergency.

 

[LoveMountains]

I make the argument most of the money in play with MS is from your credit lines. Depending on statement closing dates, it's fairly trivial to bounce a lot of credit from card to card while siphoning off cash that may be needed in an emergency.

Simple example: you have $5k CC CL that you want to cycle. You've just bought $4k in not-named-here product. In order to release your CL and buy more of that-product you have to repay your CC now. Where are the money will be coming from? (Note: if from another, less profitable CC, then you are wasting opportunity / time, because it increases your turn-around time for the original $5k CC).

 

[Therivler1]

let's say you buy $4K on the first day of the statement. you would have close to 2 months to pay that money back before you start accruing interest.

If you have two cards, you could take 4K from card #2 around day 45, pay card #1, and then get another 45-60 days on card #2. You could probably even do that for free with a balance transfer offer.

 

[DebentureBoy]

Since money is fungible, the EF and the coverage for float and the savings for the new yacht and the kid's college fund are all interchangeable as long as you are protected from the dreaded 6 month wait for your money when someone decides to kick you out of the sandbox.

MS is a blessing and a curse this way. If I suddenly became unemployed and needed $20K (a very rare situation if you consider BHs poll), then I'm off to my favorite stores and come home with $20K. Who needs an emergency fund in that case?

As some other threads in other forums have suggested, it is the vegetable option that is most concerning -- I MS, DW does not. I'm in the hospital drooling into a cup while she is left trying to figure out how to pay tens of thousands of dollars of bills. Holy crap!

To address this, I have secured records for her to go through and I've identified a trusted person to help her unwind everything. I also have a stash of money in one of her accounts which can be accessed online and is set up to pay all of my creditors. It won't cover all of the bills, but is a comfort for her and would certainly cover the minimum payments for quite a long while.

 

[raenye]

Mango is pretty good. Have had an account there for 18 months or so. They no longer waive the monthly fee with DD, but it's still a great deal. ACH qualifies for DD, though some have had trouble linking their bank due to routing number not being recognized. I can tell you an ACH from Alliant CU works great.

See previous discussion here. Also, see my tip here if you open a Mango or Union+ account to actually get your debit card.

At the $5,000 level, Mango has 6% APY but $3 fee, Union+ has 5.1% APY with avoidable fee, PPP has 5% APY with a $5 fee but no DD requirements.
Net yield is roughly $258/$250/$185 a year for Mango/Union+/PPP, respectively.

P.S.
Most of these have a referral system, so check the Conga Line sub-forum before applying.

 

[LoveMountains]

If I suddenly became unemployed and needed $20K (a very rare situation if you consider BHs poll), then I'm off to my favorite stores and come home with $20K. Who needs an emergency fund in that case?

You will need even a bigger emergency fund in this case .
Just search FT for "Receipt shows activated, but XXX not activated..."
Have not happened to you yet? Lucky you then, since I've been dealing with fraud and other issues (I've resolved all of them, but it took FDIC, BBB, and a lot of time) in the past.
And we are talking about Emergency Fund scenarios here. Murphy's laws are unforgiving and will hit when you are most vulnerable.

 

[DebentureBoy]

Love -- I think we agree more than we disagree. Add in CFPB and we're in the same boat. Throw in Beratta's motto and we're THERE, Dudette.

 

[Unifer]

I view EFs as another form of insurance. When you deal with insurance, you should never look at just any one part, you should think of your overall insurance picture at 1000 feet. Did you pick the cheapo health plan at work, so any hospital stay beyond a day is out of your pocket (for example) and you happen to be starting a new dangerous job? Ok extreme example but you get the point.

What really matters is that you sit down and really think about what could go wrong, and how much that could cost you based on the entire insurance mix you hold. Also note that some costs are very difficult to estimate, such as hospital bills that can vary wildly.

Saying all that, many people have anti-insurance philosophies, and if that's you, so be it. But one thing that frustrates me are people that say "I've never needed it so why bother" (with respect to all those who have that opinion), because that's exactly how insurance works. Most people don't need it. That's how insurance companies are profitable. But there is no way to predict if you will need it, and saying you haven't needed it in the past so you don't need one in the future is a modified form of "Past performance is indicative of future gains" which I hope that most of us agree is false.

 

[Haley]

I'll just add that when disaster hits, the things you thought were going to be an issue are often not the worst problem.

Maybe medical evac is covered but someone needs to be paid upfront. Is your credit line free? Family members in the hospital short term is an expense. Try nine months. I watched my parents live that and, well, I save compulsively.

There are lots of things like a 401k or life insurance or the house that you can tap, know how and the repayment rules before the shit hits the fan. You will have no brain cells to give towards figuring it out. Have a plan.

6 months was easy, those last three we made it through as a family, but it took all of us. My older siblings moved back in so they could pay bills instead of rent. Repaying things which had been dipped into is where it got bad.

If your family had to evacuate for several weeks how would you pay for it? Because much of that expense is upfront. Again, how much of your CL do you keep free? You can not count on being at the best possible point in the MS cycle when crap happens.

That said, there is one way I leverage my cash savings. PM me.

 

[DebentureBoy]

Unifer and Haley -- I think your posts should be required reading for folks who MS and have a family and folks interesting in really making things easy for their loved ones in the event of some unexpected event. One point in particular is that in the event of something big, there are often just not enough brain cells to go around. Having a chunk of money to tap into in such an occasion is very comforting to a loved one.

People vary considerably in their ability to cope with multiple crises and think clearly. Having that ready stash of cash available takes one crisis away. This is a tough point for some cool-headed, money savvy people to comprehend. "Just get a cash advance on this card, deposit in the bank and write checks from there" just doesn't come to mind to many people when their loved one is hooked up to tubes in the ICU. "I have no idea what to do" is a much likelier response for many folks.

The tough part of this is for lower income folks. One the one hand, they need to start stashing money into their retirement funds at an early age in order to retire in comfort and safety. On the other hand, they need to stash cash into their EF in order to prepare for and handle the unforeseen events that often come up (and probably come up WAY more often for lower income people than the folks in the poll on BH -- I can handle a blown engine in my car out of petty cash -- lower income folks may not have that luxury).

 

[thorax]

Well now I feel foolish for keeping the money in my local credit union earning .005% interest...

Since money is fungible, the EF and the coverage for float and the savings for the new yacht and the kid's college fund are all interchangeable as long as you are protected from the dreaded 6 month wait for your money when someone decides to kick you out of the sandbox.

MS is a blessing and a curse this way. If I suddenly became unemployed and needed $20K (a very rare situation if you consider BHs poll), then I'm off to my favorite stores and come home with $20K. Who needs an emergency fund in that case?

As some other threads in other forums have suggested, it is the vegetable option that is most concerning -- I MS, DW does not. I'm in the hospital drooling into a cup while she is left trying to figure out how to pay tens of thousands of dollars of bills. Holy crap!

To address this, I have secured records for her to go through and I've identified a trusted person to help her unwind everything. I also have a stash of money in one of her accounts which can be accessed online and is set up to pay all of my creditors. It won't cover all of the bills, but is a comfort for her and would certainly cover the minimum payments for quite a long while.

I fixed this by getting my wife to MS as well.

 

[shootenducs]

With Mango how do you get money out? Just by using the DC? or can you do transfers and/or bill pay from it?

 

[dcb]

I have a CU (Belco) with a checking option that I can get 3% on 1k-10k. Must have >10k at all times. 10 plastic transactions and 1 ach a month. Probably go this route. Thanks for this thread, I really need to get more prepared!

 

[raenye]

With Mango how do you get money out? Just by using the DC? or can you do transfers and/or bill pay from it?

Yes, the debit card. They offer "bill pay" which can be summarized as "go to your biller's website and put the mango card number where it asks for a credit card number."