January 24, 2011 5 Comments
I know this will come across as a “no duh” kind of post. But I sort of had a mini-realization about emergency funds.
I’m fully aware that an emergency fund is supposed to help you in emergencies. Not inconveniences, but emergencies. Losing your job. You suddenly need your $1,000 deductible you have on your car insurance or $2,400 deductible on your health insurance. You find out that a family member is sick and you need to fly across country on short notice. Expenses that aren’t foreseen except that we know that at some point each of us will have to face them.
I’ve been saving $100/month to an Emergency Fund since I started this blog. It’s gone up and down as my life situation has changed in the last 2.5 years. Now it is at a very uncomfortable down point.
I realized though, in a bit of a “no-duh” moment, that the money that I have squirreled away in mutual funds and stocks (around $7,000 worth right now) is – TA-DUH – part of my Emergency Fund.
I had always mentally thought of it as my safety net. The thing that would keep me afloat if I needed it. And in the last 11 years (since I received the majority of that money), that’s exactly what it has done. It has been the safety net that allowed me to move after graduate school, that kept me afloat financially when I was paying for some rather expensive things when my brother was sick, when I was just poorly managing my money and needed funds ASAP. It has been there.
I’m not sure how or why I never considered this part of my “Emergency Fund” even though I’ve been treating it as one for over a decade. It is just money I’ve had for most of my adult life so I never really thought about it as anything more than an “investment”. But it is in fact my ultimate emergency fund. It is the “when the rest of the world has fallen apart this will save you” pool of money that I rely on.
I realized that I don’t just have one E-fund. I have two.
I have a short term emergency fund that is exceptionally accessible to me (I can have money out of this account instantly if need be) and I have another emergency fund that is long term. That long term account I never touch unless it is absolutely, positively required. A true emergency. If I need it I can have it within a week. Which, for anything that is absolutely required, is good enough time.
This makes me feel a lot better about how low I sometimes let my “short term” emergency fund get. When I have car troubles I have no problem paying out of my short term emergency fund for the repairs. If I have medical bills that need to get paid I wouldn’t think three times about using my short term emergency fund. But I would never touch my long term E-fund for such menial expenses. I will hardly pull money out of that long term account for anything.
There is some sort of peace of mind I have knowing that there is a large pool of money that is available to me should I require it. I sometimes think about paying down my debt with it. Part of me thinks I should. But the part of me that requires safety thinks it should stay where it is. I love the security that having that money brings – even if it would take an act of congress to get me to spend it.
Do you have an account of money that you wouldn’t spend no matter what but could if absolutely required? Or a short and long term emergency fund?
Where do you go when you have an emergency that is too big for the money that you have in regular savings and checking?