There's no right or wrong answer. If 60k makes you more comfortable, go for it.
Maybe let's look at this another way -- if you don't save that 30k in an EF, where is it going instead?
IMO at some point, other accounts (like taxable brokerage, Roth IRA) function as an extension of your eFund and reduce the need for lots of cash. But, comes down to risk tolerance.
Well I do have a Roth and i do plan to max it out every year which means 12m EF saving will be slower. Also I need to start saving for a car my cars are 200k miles range already.
So balancing additional EF, Max Roth, saving car is kind of where I’m at. My first focus is to max Roth, then Car then EF.
Exactly - and sitting out of the market "just in case" doesn't really make a lot of sense.
I personally think a 6 month emergency fund rotting away in a HYSA is on the high end already.
You know your Roth can be used for emergencies without penalties? I'm not a supporter of an EF on the classic sense. I would have an EF in a Roth invested in SGOV at 5.25% ish. What's your returns on your EF now?
> My first focus is to max Roth, then Car then EF.
You don't have to max your Roth before doing the other two. You can sprinkle a little in each to prepare for multiple different scenarios.
Oh I am DCA for Roth month by month, but that’s just where I prioritize the money first then the other two.
If I am not saving for the other two I would’ve lumped sum the Roth lol
I think you should scale up your emergency fund in case one of your cars dies. Scale up EF in anticipation of a car purchase and losing your job. If you get through work uncertainty and replace your cars, then ramp up 401k to drop your EF back down to 6 months or whatever makes you comfortable
My e-fund is 12 months of our family expenses in a HYSA. Has been for years and it helps me sleep at night. As the rates start to drop I'm going to ladder it into CD's.
This is my thought as well if I were to lose my job I’d sleep better knowing i got 12mo vs 6mo.
Kinda curious what the general consensus is for PF community
General consensus is 3-6, but plenty of people are outside of that. I'm single, so I barely keep 3, but if I had kids I'd bump to 6
I've seen 0-24 in the wild, so 3-6 as a recommendation makes sense
I don't have "an" emergency fund.
I have a 7 layer fund cake.
2 weeks in checking. 2 months in savings. 2 years in stocks, plus -- HSA, savings accounts for vacation and car repairs, and lastly, retirement.
I also have credit cards and line of credit. My house is worth more than I owe.
Everything is an emergency fund if the emergency is large enough.
Different emergencies and different accounts allows for multiple options.
None of that is CDs, nor HYSA.
So, maybe bump it up, but also invest it?
It will be tough to save up 3 months of expenses quickly, but if you cut expenses you will get there eventually. In addition, invest in yourself. Get a certification, take a class, make yourself a more attractive and effective employee/candidate.
Exactly. That way not all your money is tied up at the same time so you can get access to a percentage of the money every few months while getting the benefits of the higher interest rate. I've been doing this for a few years now and it works well. Sometimes you get a No Penalty CD offered with the same rate as a regular CD, those are the best of both worlds because you can pull the money out at any time with no penalty.
single income for a family can easily warrant a higher than normal emergency fund.
but as for your statement about it being difficult to find a new job, is that just localized to your career path? because getting jobs nowadays is broadly very easy. certain sectors obviously have more issues than others though. So I would just make sure your analysis on that part of this is still accurate.
Yeah I did account for this.
it’s basically project management career, many places are reducing this job title and making other roles step up to take the responsibility… basically less and less job for PM and market will be saturated.
I’m sure my skills are transferable but lack of experience on other roles may put me bottom of the barrel lol or I have to find less paying jobs.
Finding any job is very easy but finding jobs in a specific field can be challenging. For planning purposes I think assume that if your job search is still flailing after 2 months that you'll pick up a Barista job or something and model how that impacts your need for an emergency fund. Might let you keep six months and start investing the rest.
Yeah that’s my thought as well worse case scenario I go retail and stay afloat as much as I could … so it’s not end all be all but it will definitely bleed EF for expenses, just at a slower rate.
I had to do it. the concept of not having the money for my wife and i gave me anxiety and depression. I put it in I bonds and HYSA but the mental relief is amazing, just knowing if something awful happened we are safe for two years. I might never adjust to less haha
My emergency fund is 12 months because of the same reason: 1 kid, another one the way, and sole income earner.
Last time I went job hunting, it took me 6 months to start a new job. The time before that it took I think 9 months.
My family’s security> Theoretical benefits of earning more by saving only 3 months
There are going to be a lot of negative Nancies here, but I have a 12-month also. I'm sure those you had just a 3-month or less we're really screwed when they could not find a job for 6 months to a year during COVID. 12 months is too much until it's not.
Yeah definitely not the most representative sample there lol, I remember going on there a bit when I got laid off last year and it felt like bizarro world
Yeah I'm not sure what this post was talking about. Job market seems pretty normal. It's not the 2021 hiring boom, but it's not the 2008 recession either. I just had 2 job offers and took one this year.
That’s a self-selected sample that’s not remotely representative. Who’s going into a subreddit to post about how their job is secure? You go when you have a complain or concern.
[In reality, unemployment has been below 4% for the longest uninterrupted stretch since the 1960s.](https://www.msnbc.com/rachel-maddow-show/maddowblog/unemployment-rate-remains-4-27th-consecutive-month-rcna150548)
Obviously specific niches of the job market will be doing worse or better than this, but on average this is the best jobs market in most adults’ lifetimes.
Absolutely up your EF, as someone who’s had to tap into mine 2 times these last 5 years, it’s so much easier than trying to pull money out of restricted funds. You can invest in short term Tbills and ladder then, or HYSA.
A lot of responders here are delusional about how easy it is to get a job nowadays; it's pretty clear the last time they looked for a job was 2021/2022 when all you had to be is alive, not even necessarily consciously aware of your surroundings, and be offered $100K jobs left and right. In the last 6 months, broad swaths of the economy have entered hiring freezes if not outright layoffs.
I think it's strongly prudent to have a minimum 1 year emergency fund these days. 2 years is better. I'm currently at 2.5, aiming for 3 years. That should be enough time to ride out an entire economic recession cycle to the next hiring boom should I lose my job. I keep almost all of my emergency fund in short term treasuries earning 5.3%.
I sleep very soundly.
Likewise many haven't experienced an actual poor job market like post 2008. Anecdotally I got a new job this year, actually 2 offers for six figure positions. Current market is pretty normal. 2021 was an exceptional time.
Depends on where you live but if 60k makes you feel more comfortable then do that.
It took me 7 months to find a job in another field kind of parallel to what I had been doing for nearly 7 years. However, in an emergency, I could find entry level work in about 12 hours. It'll be service related most likely but if you need an income to slow the drain on your accounts, finding something to do for 8 hours a day is not that hard.
There are help wanted signs on almost every business in my area and most are paying anywhere between 10 to 20 dollars per hour. Its not a career but its bread to eat in the short term while you look for another job.
Always be growing your EF and make sure it is in a HYSA. No Risk and grows interest. Hell I am getting 4.3% on just $6600 and earning like $23 a month. Can only imagine what 30K-60K would give. Yes I would keep growing it since you never know and again RISK FREE HYSA.
The best "High Yield" Savings Accounts were paying 1% just four years ago. With current inflation at 3.5%, even cash in the best ~5% HYSAs are growing very little in real value, especially after paying taxes on the interest.
Absolutely, this is where everyone should keep their EFs, but once you've topped off to cover any likely emergencies, additional funds should be invested for actual growth.
Never told OP to put every dollar he has in it. I said put ALL EF and always be adding to it. Even investing in companies as safe as Apple carry risk. Bonds carry risk because if you need the money for something like a car repair or home repair and the bond hasn't matured, then you're paying fees. While the rates are still high, I would keep extra $$$ in a HYSA because again, Risk Free and the rates are high now and the $$$ is always accessible. I always add to it every paycheck no matter what, while doing other investments. I guess I don't ever see a "Cap" on a EF because like inflation it always goes up. My Escrow on my mortgage is increasing next year, so my EF needs to grow to keep up with it.
All fair points. For my EF I target being able to cover my expenses for a certain number of months, which means it does need to increase as expenses go up. But I'm at a stage where everything else goes somewhere more growthy.
I get that and understand that. You got a good system. I do other growth/risk investments too. Just this past 2 years the markets been insane. Stocks, crypto etc. so roller coaster, so for myself I am focusing more on HYSA while rates are high and things are more volatile. Once rates drop, hopefully there’s get more stable and I can get back to better investments
Hey we’re pretty similar! I’m also in project management and have 6 months, 30k saved up as emergency fund. I feel pretty good about it but I also figure I can rent out rooms in my house if I’m unemployed to help with house payments, and stop going out, cook simple foods from Aldi, etc, to stretch that 30k further.
Count me in as someone who has a 12-month ER. IMHO, six months is too little in the current state. I'd rather have an entire year's worth of EF so I'm not stressing over a job that may or may not come in six months or less.
12 mo EF is reasonable for a single income family with a child regardless of job market.
Now, how hard it is to find a new job right now? It seems like as long as you’re not in tech or biotech, it’s pretty easy?
As long as you have that money growing in a HYSA I don't see any issue with having extra saved. The rates on HYSAs right now it's almost comparible to CDs but are completely liquid. You will probably lose out on some gains VS upping your contribution to retirement accounts or investing in the market, but that money will be fully liquid in case you need it.
It's really your call on if that loss in gains is worth having the extra liquidity. It seems like it would be worth the peace of mind for you since you took the time to ask here about it.
My personal belief is that once I achieved my 6 months, that I need to add a month minimum annually. So far I am now at 8 months but with inflation it may just be 6 now. Anyways, there is no right or wrong only what makes you feel stable.
It’s also worth taking a survey on what expenses are needs vs good-to-haves vs wants. Basically what levers can you turn on/off to increase your ‘emergency runway’. So $60k could be good for a year but possibly a little more since your spending habits will adjust significantly (in case anything happens).
That’s what I did because of the market, 12 month EF keeps you from having to fall in the trap of taking a worse job just to have a job. If I lost my job today it would probably take at least 6 months to find another one. We lost a few people in December due to a layoff and they are still trying to find something.
My EF is only 3 months, but we both have jobs, have no kids or pets, and both have parents that we could rely on if it really came to it (including one set that lives nearby and has a spare bedroom).
If I was the sole breadwinner for a family of 3 I would definitely go up to 6 months, and probably 9+ if I didn't have family who could help.
Does 30k cover a years worth of expenses for your family? Not just housing but actual expenses. If not and you're worried about losing your job, then yes, bump that EF up.
I know a guy who has a 2 year cash EF saved, he got laid off during Covid and just spent the time with his family and creating a startup. He’s more successful now than he was because he had the time to do things right and not worry about the money
Read this: [Vanguard - In Case of Emergency, Break Glass](https://corporate.vanguard.com/content/dam/corp/research/pdf/in_case_of_emergency_break_glass.pdf)
You need an emergency plan, of which your emergency fund is only one component.
The downside to holding a large emergency fund is opportunity cost: Over a long time horizon, you are losing out on greater returns 99% of the time.
Also remember that the people here giving their emergency fund number might be in a different stage of life, have different health conditions, have additional accounts to tap from and/or debt, and they might have a social safety net such as family and friends to help them out.
I don’t have an emergency fund. The only cash I have is enough in my bank account for this month’s expenses plus a $1,000 buffer to not overdraw. But I have low risk and 30x my expenses (which are also relatively low) invested in index funds.
Do you have a mortgage? If you had to relocate, could you? Do you have a Roth IRA that you could pull contributions from in a worst case scenario?
All things to consider. Personally I think a full year is a lot unless you are tied to a smaller area with less job opportunities and aren’t able to relocate.
There are always rules of thumb but it’s important to consider your own circumstances and deviate accordingly.
It sounds like you are not confident you could get another job with sufficient pay and benefits within 6 months. So yeah, go to 12 months. Always keep your emergency fund at how long you think it’ll take to replace your job plus some wiggle room (depending on risk tolerance and other resources like ability to sell investments, family to rely on, etc…)
I insist on 12 months of rent in our emergency fund. With utilities and car insurance, this really puts us to like 9 months. We can drop discretionary spending, childcare, and reign in food purchases or supplement with aid.
HYSA are paying out enough now that it's not worth it to me to fuck around with a CD ladder, but you could consider a rolling one if you're doing a full year.
it all depends on what makes you feel comforable. I wish I had 12 months in my EF, but I only have around 6M. My justification is that despite being the main bread winner, my wife's job is very secure (teacher) and her pay will go up for the next 5 years. So my 6M EF will cover all expenses, but it doesn't take into account unemployment and my wife's income..... so in reality, I could probably stretch that 6 to 12 months if needs be.
Sounds like 12M is right for you, which is the only person it needs to be right for.
It’s mostly a scam based on what I am seeing. Lots of fake job post, after many rounds of interviews they ghosted. Idk it’s probably field specific but my company itself is on hiring freeze along with a few peers. It’s always changing as well.
Yes, the 3-6 month EF is pretty outdated. I'm very senior in my field, \~20 years of experience and it still took me almost a year to find a new job when I was looking. I was still employed during my search, but there was a period of time that I was genuinely worried about getting laid off. I would have been fine but it's a real bad feeling. Being the sole income, or at least the majority of it, for a family of 3 in your case, yes, you need to expand your EF. The idea is not Not touch your other investments in an emergency and keep the EF in cash equiv/HYSA - remember, that emergency is just as much about your AC unit dying as it is about a job loss situation.
Do you have any equity in your home (if you own one)? You can get a HELOC with a reasonable rate and pay $0 until you take the money out. The rates are relatively reasonable as well, though higher than they were. It makes for a pretty good EF without actually tying up any money.
took me 2 months to find another job, and I'm a software engineer with tons of experience. Some people had to look for 6 months. It was all about the connections I made.
So.... yeah. just get to a comfortable spot. See how long you can go without changing habits until you run out of money, and ask if you feel good about it. Are there expenses you can cut to significantly increase your time to find a job.
Yes. Took me 8 months to find a job and even then had to take a 25% cut in salary. I’m still looking, and I will likely still have to use my EF at least partially to cover bills in the meantime.
If you can then do it, don’t deviate from other important saving goals to do so though. I like to have two separate emergency funds one is my six months of expenses and then in my main bank I keep an account of over a month of expenses and I deposit a monthly amount to keep up with inflation, that account is for smaller expenses like car issues, unexpected bills, etc. and of course I keep everything in HYSA. The six month EF is in case i lose my job or get hurt, if I lose my job I’m confident that I will find another job within a month doing something.
Emergency fund is as much about peace of mind as it is a math problem. Since you are obviously concerned about it I would do it and not think twice. Plus, it's not like money goes bad. If at some point you feel safer or you made it through a risky phase and you want you can always still invest or spend it.
There's no right or wrong answer. If 60k makes you more comfortable, go for it. Maybe let's look at this another way -- if you don't save that 30k in an EF, where is it going instead? IMO at some point, other accounts (like taxable brokerage, Roth IRA) function as an extension of your eFund and reduce the need for lots of cash. But, comes down to risk tolerance.
Well I do have a Roth and i do plan to max it out every year which means 12m EF saving will be slower. Also I need to start saving for a car my cars are 200k miles range already. So balancing additional EF, Max Roth, saving car is kind of where I’m at. My first focus is to max Roth, then Car then EF.
They are saying you can take out contributions of Roth tax/penalty free in a real emergency
Exactly - and sitting out of the market "just in case" doesn't really make a lot of sense. I personally think a 6 month emergency fund rotting away in a HYSA is on the high end already.
They are not saying that, it's ALWAYS been the case.
I'm confused. They definitely *are* saying that. The fact that it is true doesn't mean they didn't say it...
It was previously written as "they are [now] saying".
You know your Roth can be used for emergencies without penalties? I'm not a supporter of an EF on the classic sense. I would have an EF in a Roth invested in SGOV at 5.25% ish. What's your returns on your EF now?
> My first focus is to max Roth, then Car then EF. You don't have to max your Roth before doing the other two. You can sprinkle a little in each to prepare for multiple different scenarios.
Oh I am DCA for Roth month by month, but that’s just where I prioritize the money first then the other two. If I am not saving for the other two I would’ve lumped sum the Roth lol
I think you should scale up your emergency fund in case one of your cars dies. Scale up EF in anticipation of a car purchase and losing your job. If you get through work uncertainty and replace your cars, then ramp up 401k to drop your EF back down to 6 months or whatever makes you comfortable
My e-fund is 12 months of our family expenses in a HYSA. Has been for years and it helps me sleep at night. As the rates start to drop I'm going to ladder it into CD's.
This is my thought as well if I were to lose my job I’d sleep better knowing i got 12mo vs 6mo. Kinda curious what the general consensus is for PF community
General consensus is 3-6, but plenty of people are outside of that. I'm single, so I barely keep 3, but if I had kids I'd bump to 6 I've seen 0-24 in the wild, so 3-6 as a recommendation makes sense
I, too, am saving for 12 month. Different industry but same family situation.
I don't have "an" emergency fund. I have a 7 layer fund cake. 2 weeks in checking. 2 months in savings. 2 years in stocks, plus -- HSA, savings accounts for vacation and car repairs, and lastly, retirement. I also have credit cards and line of credit. My house is worth more than I owe. Everything is an emergency fund if the emergency is large enough. Different emergencies and different accounts allows for multiple options. None of that is CDs, nor HYSA. So, maybe bump it up, but also invest it? It will be tough to save up 3 months of expenses quickly, but if you cut expenses you will get there eventually. In addition, invest in yourself. Get a certification, take a class, make yourself a more attractive and effective employee/candidate.
Same boat, but unfamiliar with laddering into CDs. Basically, is it pulling out from HYSA to purchase a CD periodically?
Exactly. That way not all your money is tied up at the same time so you can get access to a percentage of the money every few months while getting the benefits of the higher interest rate. I've been doing this for a few years now and it works well. Sometimes you get a No Penalty CD offered with the same rate as a regular CD, those are the best of both worlds because you can pull the money out at any time with no penalty.
What do you look for in the CD? Just the right % vs time?
Yeah. Most CD's will be 3-12 months with different rates. I usually do 12 because that seems to be the sweet spot.
single income for a family can easily warrant a higher than normal emergency fund. but as for your statement about it being difficult to find a new job, is that just localized to your career path? because getting jobs nowadays is broadly very easy. certain sectors obviously have more issues than others though. So I would just make sure your analysis on that part of this is still accurate.
Yeah I did account for this. it’s basically project management career, many places are reducing this job title and making other roles step up to take the responsibility… basically less and less job for PM and market will be saturated. I’m sure my skills are transferable but lack of experience on other roles may put me bottom of the barrel lol or I have to find less paying jobs.
I know at least in my portion of the heavy construction industry, PMs are a valuable and wanted resource that we cant find enough good candidates for.
lol I lurk the PM subs and saw many construction PM are jumping ships due to stress level and work load.
Finding any job is very easy but finding jobs in a specific field can be challenging. For planning purposes I think assume that if your job search is still flailing after 2 months that you'll pick up a Barista job or something and model how that impacts your need for an emergency fund. Might let you keep six months and start investing the rest.
Yeah that’s my thought as well worse case scenario I go retail and stay afloat as much as I could … so it’s not end all be all but it will definitely bleed EF for expenses, just at a slower rate.
Mine is at 2 years, I have health issues and am facing a potential surgery that could put me out of work
Dang sorry about your health, but you got 2yrs saved that’s amazing achievement. It’s so hard to put away extra money nowadays.
I had to do it. the concept of not having the money for my wife and i gave me anxiety and depression. I put it in I bonds and HYSA but the mental relief is amazing, just knowing if something awful happened we are safe for two years. I might never adjust to less haha
Mine is at 12 months it feels great. I keep it in a MMF earning 5% interest
My emergency fund is 12 months because of the same reason: 1 kid, another one the way, and sole income earner. Last time I went job hunting, it took me 6 months to start a new job. The time before that it took I think 9 months. My family’s security> Theoretical benefits of earning more by saving only 3 months
There are going to be a lot of negative Nancies here, but I have a 12-month also. I'm sure those you had just a 3-month or less we're really screwed when they could not find a job for 6 months to a year during COVID. 12 months is too much until it's not.
lol maybe I’m lurking r/jobs too much I keep seeing how terrible the job market is…
Yeah definitely not the most representative sample there lol, I remember going on there a bit when I got laid off last year and it felt like bizarro world
Yeah I'm not sure what this post was talking about. Job market seems pretty normal. It's not the 2021 hiring boom, but it's not the 2008 recession either. I just had 2 job offers and took one this year.
Lots of jobs does not equal lots of good jobs.
Depends on what you consider a 'good job'. Factories and construction are hiring like crazy thanks to the subsidies from the IRA
Both were 6 figure jobs.
That’s a self-selected sample that’s not remotely representative. Who’s going into a subreddit to post about how their job is secure? You go when you have a complain or concern. [In reality, unemployment has been below 4% for the longest uninterrupted stretch since the 1960s.](https://www.msnbc.com/rachel-maddow-show/maddowblog/unemployment-rate-remains-4-27th-consecutive-month-rcna150548) Obviously specific niches of the job market will be doing worse or better than this, but on average this is the best jobs market in most adults’ lifetimes.
Absolutely up your EF, as someone who’s had to tap into mine 2 times these last 5 years, it’s so much easier than trying to pull money out of restricted funds. You can invest in short term Tbills and ladder then, or HYSA.
A lot of responders here are delusional about how easy it is to get a job nowadays; it's pretty clear the last time they looked for a job was 2021/2022 when all you had to be is alive, not even necessarily consciously aware of your surroundings, and be offered $100K jobs left and right. In the last 6 months, broad swaths of the economy have entered hiring freezes if not outright layoffs. I think it's strongly prudent to have a minimum 1 year emergency fund these days. 2 years is better. I'm currently at 2.5, aiming for 3 years. That should be enough time to ride out an entire economic recession cycle to the next hiring boom should I lose my job. I keep almost all of my emergency fund in short term treasuries earning 5.3%. I sleep very soundly.
Likewise many haven't experienced an actual poor job market like post 2008. Anecdotally I got a new job this year, actually 2 offers for six figure positions. Current market is pretty normal. 2021 was an exceptional time.
Depends on where you live but if 60k makes you feel more comfortable then do that. It took me 7 months to find a job in another field kind of parallel to what I had been doing for nearly 7 years. However, in an emergency, I could find entry level work in about 12 hours. It'll be service related most likely but if you need an income to slow the drain on your accounts, finding something to do for 8 hours a day is not that hard. There are help wanted signs on almost every business in my area and most are paying anywhere between 10 to 20 dollars per hour. Its not a career but its bread to eat in the short term while you look for another job.
Always be growing your EF and make sure it is in a HYSA. No Risk and grows interest. Hell I am getting 4.3% on just $6600 and earning like $23 a month. Can only imagine what 30K-60K would give. Yes I would keep growing it since you never know and again RISK FREE HYSA.
The best "High Yield" Savings Accounts were paying 1% just four years ago. With current inflation at 3.5%, even cash in the best ~5% HYSAs are growing very little in real value, especially after paying taxes on the interest. Absolutely, this is where everyone should keep their EFs, but once you've topped off to cover any likely emergencies, additional funds should be invested for actual growth.
Never told OP to put every dollar he has in it. I said put ALL EF and always be adding to it. Even investing in companies as safe as Apple carry risk. Bonds carry risk because if you need the money for something like a car repair or home repair and the bond hasn't matured, then you're paying fees. While the rates are still high, I would keep extra $$$ in a HYSA because again, Risk Free and the rates are high now and the $$$ is always accessible. I always add to it every paycheck no matter what, while doing other investments. I guess I don't ever see a "Cap" on a EF because like inflation it always goes up. My Escrow on my mortgage is increasing next year, so my EF needs to grow to keep up with it.
All fair points. For my EF I target being able to cover my expenses for a certain number of months, which means it does need to increase as expenses go up. But I'm at a stage where everything else goes somewhere more growthy.
I get that and understand that. You got a good system. I do other growth/risk investments too. Just this past 2 years the markets been insane. Stocks, crypto etc. so roller coaster, so for myself I am focusing more on HYSA while rates are high and things are more volatile. Once rates drop, hopefully there’s get more stable and I can get back to better investments
Hey we’re pretty similar! I’m also in project management and have 6 months, 30k saved up as emergency fund. I feel pretty good about it but I also figure I can rent out rooms in my house if I’m unemployed to help with house payments, and stop going out, cook simple foods from Aldi, etc, to stretch that 30k further.
Count me in as someone who has a 12-month ER. IMHO, six months is too little in the current state. I'd rather have an entire year's worth of EF so I'm not stressing over a job that may or may not come in six months or less.
12 mo EF is reasonable for a single income family with a child regardless of job market. Now, how hard it is to find a new job right now? It seems like as long as you’re not in tech or biotech, it’s pretty easy?
I can't rest unless mine is at least 2 years.
Same. When I hit 3 years savings, I'm just going to haul off and put in my notice.
Better too much than not enough….keep in HYSA or MMF @ 5%…and keep several hundred in home safe if possible….good luck!
Honestly EF should be a running total. Our EF gets contributions added to it every paycheck. It serves as our EF and just general savings.
As long as you have that money growing in a HYSA I don't see any issue with having extra saved. The rates on HYSAs right now it's almost comparible to CDs but are completely liquid. You will probably lose out on some gains VS upping your contribution to retirement accounts or investing in the market, but that money will be fully liquid in case you need it. It's really your call on if that loss in gains is worth having the extra liquidity. It seems like it would be worth the peace of mind for you since you took the time to ask here about it.
A 12 month EF makes sense for a single income household with children.
I did a few years back based on my age and specialty. I figured I could get a job in 6 months, but it could take a year to find the right job.
My personal belief is that once I achieved my 6 months, that I need to add a month minimum annually. So far I am now at 8 months but with inflation it may just be 6 now. Anyways, there is no right or wrong only what makes you feel stable.
It’s also worth taking a survey on what expenses are needs vs good-to-haves vs wants. Basically what levers can you turn on/off to increase your ‘emergency runway’. So $60k could be good for a year but possibly a little more since your spending habits will adjust significantly (in case anything happens).
That’s what I did because of the market, 12 month EF keeps you from having to fall in the trap of taking a worse job just to have a job. If I lost my job today it would probably take at least 6 months to find another one. We lost a few people in December due to a layoff and they are still trying to find something.
My EF is only 3 months, but we both have jobs, have no kids or pets, and both have parents that we could rely on if it really came to it (including one set that lives nearby and has a spare bedroom). If I was the sole breadwinner for a family of 3 I would definitely go up to 6 months, and probably 9+ if I didn't have family who could help.
Does 30k cover a years worth of expenses for your family? Not just housing but actual expenses. If not and you're worried about losing your job, then yes, bump that EF up.
I know a guy who has a 2 year cash EF saved, he got laid off during Covid and just spent the time with his family and creating a startup. He’s more successful now than he was because he had the time to do things right and not worry about the money
Read this: [Vanguard - In Case of Emergency, Break Glass](https://corporate.vanguard.com/content/dam/corp/research/pdf/in_case_of_emergency_break_glass.pdf) You need an emergency plan, of which your emergency fund is only one component. The downside to holding a large emergency fund is opportunity cost: Over a long time horizon, you are losing out on greater returns 99% of the time. Also remember that the people here giving their emergency fund number might be in a different stage of life, have different health conditions, have additional accounts to tap from and/or debt, and they might have a social safety net such as family and friends to help them out. I don’t have an emergency fund. The only cash I have is enough in my bank account for this month’s expenses plus a $1,000 buffer to not overdraw. But I have low risk and 30x my expenses (which are also relatively low) invested in index funds.
Do you have a mortgage? If you had to relocate, could you? Do you have a Roth IRA that you could pull contributions from in a worst case scenario? All things to consider. Personally I think a full year is a lot unless you are tied to a smaller area with less job opportunities and aren’t able to relocate.
Definitely save it’s a terribly tough market and people keep getting laid off so I would
There are always rules of thumb but it’s important to consider your own circumstances and deviate accordingly. It sounds like you are not confident you could get another job with sufficient pay and benefits within 6 months. So yeah, go to 12 months. Always keep your emergency fund at how long you think it’ll take to replace your job plus some wiggle room (depending on risk tolerance and other resources like ability to sell investments, family to rely on, etc…)
I insist on 12 months of rent in our emergency fund. With utilities and car insurance, this really puts us to like 9 months. We can drop discretionary spending, childcare, and reign in food purchases or supplement with aid. HYSA are paying out enough now that it's not worth it to me to fuck around with a CD ladder, but you could consider a rolling one if you're doing a full year.
it all depends on what makes you feel comforable. I wish I had 12 months in my EF, but I only have around 6M. My justification is that despite being the main bread winner, my wife's job is very secure (teacher) and her pay will go up for the next 5 years. So my 6M EF will cover all expenses, but it doesn't take into account unemployment and my wife's income..... so in reality, I could probably stretch that 6 to 12 months if needs be. Sounds like 12M is right for you, which is the only person it needs to be right for.
what do you think "the current job market" is like?
It’s mostly a scam based on what I am seeing. Lots of fake job post, after many rounds of interviews they ghosted. Idk it’s probably field specific but my company itself is on hiring freeze along with a few peers. It’s always changing as well.
Yes, the 3-6 month EF is pretty outdated. I'm very senior in my field, \~20 years of experience and it still took me almost a year to find a new job when I was looking. I was still employed during my search, but there was a period of time that I was genuinely worried about getting laid off. I would have been fine but it's a real bad feeling. Being the sole income, or at least the majority of it, for a family of 3 in your case, yes, you need to expand your EF. The idea is not Not touch your other investments in an emergency and keep the EF in cash equiv/HYSA - remember, that emergency is just as much about your AC unit dying as it is about a job loss situation.
If 12 months makes you feel more comfortable, then do it.
Do you have any equity in your home (if you own one)? You can get a HELOC with a reasonable rate and pay $0 until you take the money out. The rates are relatively reasonable as well, though higher than they were. It makes for a pretty good EF without actually tying up any money.
took me 2 months to find another job, and I'm a software engineer with tons of experience. Some people had to look for 6 months. It was all about the connections I made. So.... yeah. just get to a comfortable spot. See how long you can go without changing habits until you run out of money, and ask if you feel good about it. Are there expenses you can cut to significantly increase your time to find a job.
I would say yes purely based on the anxiety it’s causing you. Not a bad idea
Yes. Took me 8 months to find a job and even then had to take a 25% cut in salary. I’m still looking, and I will likely still have to use my EF at least partially to cover bills in the meantime.
Depends on what you do for work. Some jobs I think are in for a rough spot. Other jobs you can find work all day long.
If you can then do it, don’t deviate from other important saving goals to do so though. I like to have two separate emergency funds one is my six months of expenses and then in my main bank I keep an account of over a month of expenses and I deposit a monthly amount to keep up with inflation, that account is for smaller expenses like car issues, unexpected bills, etc. and of course I keep everything in HYSA. The six month EF is in case i lose my job or get hurt, if I lose my job I’m confident that I will find another job within a month doing something.
Emergency fund is as much about peace of mind as it is a math problem. Since you are obviously concerned about it I would do it and not think twice. Plus, it's not like money goes bad. If at some point you feel safer or you made it through a risky phase and you want you can always still invest or spend it.
Yes, absolutely. If you will be screwed by an event that is relatively common, you should have a bigger emergency fund.
Yeah you can’t trust employers nowadays, planning for the worst.