Emergency fund

[jay89]

Hi Ben and everyone,

I wanna ask about an emergency fund.
I have been saving my emergency fund in my saving account, but it got me wondering whether I should keep it there or purchase some money market fund.

So my question to everyone is, do you save your emergency fund in your normal saving account, or is there a special money market fund that we can purchase in Rakuten Securities or something?

Thanks in advance!

[RetireJapan]

We keep ours in a separate bank account for me, one for my wife, and some at home in cash (after the big earthquake in Sendai last time none of the ATMs were working so it was helpful to have some cash in reserve).

If you can get interest for it, so much the better, but the most important thing is that you can get access to the funds if you need them.

Anyone else?

[ricardo]

Stick ¥3 million under the mattress (literally), put another ¥5m in a normal bank account.

Emergency fund.

Job done.

[adamu]

I see it as the name suggests: a fund for emergencies, which means maximum liquidity. I don't want to have to apply or wait some time to get at the money when it's needed. For that reason, it's just in a bank account.

However, I also see the logic in trying to capture some of the value. After all, the bank is investing your deposit and making money from it, so you may as well try to capture some of the value of it for yourself, rather than letting the bank have it. It also devalues as a cash balance so it's technically a cost. But I see it as the price of security, almost like your own self-underwritten insurance policy.

One possibility could be to split the fund into tiers. Have a minimum "available at all times" bank balance, and then maybe some vehicles with more strings attached. But while I've been tempted, I don't bother. The high bank balance is also helpful for entitling you to most of the perks the online banks offer, such as free transfers and cash withdrawals.

[Tony]

The high bank balance is also helpful for entitling you to most of the perks the online banks offer, such as free transfers and cash withdrawals.

This is exactly what I use it for. I have our emergency fund in a 2-week term deposit at shinsei so that I can get the benefits of Gold status (free ATMS and 5 free transfers a month). A maximum of 2-weeks is enough liquidity for me, and it also means I'm less likely to dip into it unless I really have to (and I have yet to touch it).

[RetireJapan]

The high bank balance is also helpful for entitling you to most of the perks the online banks offer, such as free transfers and cash withdrawals.

This is exactly what I use it for. I have our emergency fund in a 2-week term deposit at shinsei so that I can get the benefits of Gold status (free ATMS and 5 free transfers a month). A maximum of 2-weeks is enough liquidity for me, and it also means I'm less likely to dip into it unless I really have to (and I have yet to touch it).

I have 300,000 yen's worth of euros for that same purpose

[Sybil]

Having decent amounts of readily available cash is always advisable. The stock market doesn't rise forever. Eventually, there will be another major correction. You need to have cash available to buy 'cheap' stocks.

During the Leahman crisis, I was buying when those over-exposed on stocks were selling. People panic when they see the equivalent of a year's salary disappear from their index trackers in a week...

[adamu]

I have our emergency fund in a 2-week term deposit at shinsei

I used to do that, but then I needed the money for a guaranteed return investment opportunity, and two weeks just made it in time. I don't want to go through that waiting again, so now I just keep it as a normal deposit. You don't want an emergency service that takes two weeks to respond, I make sure my emergency fund is instantly available too.

[jay89]

Thanks everyone for the replies!

yeah, I think I'm gonna keep depositing to my designated bank account for emergency fund!

The reason that I'm asking this question is because I came up reading about this vanguard article and recommendation for emergency fund:

https://investor.vanguard.com/emergency ... gency-fund
https://investor.vanguard.com/mutual-fu ... file/VMFXX

So, I was thinking if Vanguard has a designated fund that we can buy for emergency fund, I was thinking maybe there is a japanese equivalent fund like that as well.

But anyway, thanks everyone for the insights!

[Tony]

I needed the money for a guaranteed return investment opportunity

That sounds decidedly non-emergency.