RetireJapan

jay89 wrote: ↑Wed Jan 12, 2022 7:24 am I know the definition of emergency fund is for emergency use that you can take right away, but I feel like such a waste to store it in a normal account with no interest whatsoever.

mighty58 wrote: ↑Wed Jan 12, 2022 6:07 pm In my mind, there are two primary ways you can define what constitutes the "emergency" that you are keeping this money around for. The most common one is as a backup in case, say, you were to suddenly lose your job or have a (very) large unexpected expense (ie. USD10,000+). It's there to give you the peace of mind that you won't suddenly be destitute if something such as that happens.

The level of liquidity required (ie. how quickly you can get cash-in-hand) is probably not too high for these types of situations. If you lose your job, you will draw it down little by little over time as you need it. As such, I believe it's perfectly fine to park the money in a fund it ETF where you can convert it to cash within a few days at most. Just ensure your investment is not in something too risky, or something correlated with your work sector, as you don't want to be in something that will go down just as you are in a position to potentially lose your job due to bad market conditions. BTW, for unexpected expenses under $10,000, it's best just to put in on the credit card, so immediate liquidity of the emergency fund is not an issue.

Now the other definition you could use for "emergency" is for major disaster situations, like if a massive earthquake hits and you need to get out of dodge asap but the power is out over a wide area. For this type of scenario, I would recommend cold hard cash stored in your home.

RetireJapan wrote: ↑Thu Jan 13, 2022 12:10 am 3. vehicle related. Accident or breakdown, maybe you need a new vehicle.

4. home related. Leak/flood/fire/replacing a boiler or similar.

Newseishain wrote: ↑Thu Feb 24, 2022 2:16 pm This has most certainly been a head scratcher for us as well. In the end, we have about 5 man in cash for unexpected day to day emergencies, 10 man in the disaster supplies, and currently 3 months of living expenses in one of those tsumitate savings accounts.

None of it is earning any interest of course, but we're placing more emphasis on liquidity, at least for now.

Tony wrote: ↑Thu Feb 24, 2022 9:09 pm 3 and 4 I don't see as emergencies, as these are things that are going to happen, given time. So I keep a separate account for home/auto repairs that I put a little into each month, and just continue doing so. I don't like the idea of dipping into my emergency fund, just from a psychological perspective. I'm afraid I might get a "Well I used it for this before, so I guess I can use it for this as well" mentality about it, where as for me it is only for what you listed as emergency 2, and to a lesser extent emergency 1.