Comments

  1. Brave New Life says

    If I were in debt, I would have an emergency fund of 6-months expenses that can’t be paid by credit card. It makes no sense to hold credit card debt at 15% interest rates, while you have cash earning 0%. On the other hand, if you have payments that can’t be paid by credit card in a crunch (e.g. mortgage) then you need to have a back-up plan. You could potentially get a CC cash advance, but that’s costly too. If you are not in debt and have some semi-liquid savings (including stocks) then I would not hold a specific emergency fund. This is the position I’m in.

  2. says

    If you’re in debt, the size of your emergency fund should depend on how much debt you’ve got, the interest rates on your debt, and whether the interest rate on the debt is fixed or variable. If you have pretty good terms on your existing debt, e.g., low, fixed interest rates, then I’d go with a large emergency fund. Maybe about 6 months worth of expenses. If you’re under crippling credit card debt, I’d try to pay that off as quickly as possible and follow Dave Ramsey’s advice of only $1,000.

  3. James says

    It’s easy to talk about emergency plan if you have means to have one, but in this crisis … there are people who don’t even have for basic needs, much less emergency fund.

  4. Super Frugalette says

    When my son was six weeks old, my grandmother passed away. I was a new mom, a full time grad student and my husband was a grad student so $$ was tight. I would have had to fly to the funeral. Guess what…I didn’t go. This wasn’t the time to use an emergency fund. This was a time to accept life’s limitations.

  5. Jamie says

    This is great advice. We keep about $500 cushion in our checking account, as well, in addition to our emergency fund. Life – especially life with kids – has these expensive fluctuations from month to month.

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