I’m curious how people handle or plan on handling the money they put away for a 6-month emergency fund. Or what they consider that fund to be in general.
I personally have my fund broken into a few different categories, earmarked for specific reasons, but I consider it my 6-month emergency fund overall.
The top categories are split as a 1-month and a 5-month E-fund. The 1-month is my checking account, covering 1 full month of all expenses. The 5-month portion covers essential costs and debts, divided into subcategories like ‘new vehicle fund,’ which could be used for emergencies if needed.
The general idea is that any category in my 5-month fund could be reallocated for emergency usage, so if my spouse and I both lost our jobs, funds for a new car would immediately shift to emergency usage.
My emergency fund is 6 months’ worth of necessary expenses in case I lose my job, based on my current budget. I keep it in a high-yield savings account. If I use any of it, I replenish it fully by adding it to my budget. My new car money is separate and not liquid.
An emergency fund has one job: emergencies. A separate fund for cars or other planned expenses has a different job. Of course, in an actual emergency, you could tap into the car fund if needed, but I’d recommend keeping them separate in your budget.
My spouse and I focus on keeping our emergency funds liquid. Our fund matches current expenses, so we can stretch it by cutting back in an emergency.
We keep some cash on hand and in accounts, and we have access to additional funds if needed (in Australia, you can redraw mortgage overpayments after notifying the bank). It’s more important to us to have flexible funds available rather than assigned spending categories within the emergency fund.
We keep one month’s worth in our bills checking account for bill automation, two months in a high-yield savings account, and another three months in a brokerage account.
Maybe I’m misunderstanding, but I kept my emergency fund separate from any planned purchase savings. The emergency fund was for covering bills, food, and other essentials only. I also had separate funds for things like car savings, holidays, etc., which theoretically could be used in emergencies, but I didn’t consider them part of the actual emergency fund.