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    7 Replies Latest reply on Nov 23, 2007 1:56 PM by Lighthouse24

    Emergency Fund

    smarteshopper Newbie
      People often reccommend setting up an emergency fund. How much should a family set aside for an emergency fund?
        • Re: Emergency Fund
          smarteshopper Newbie
          • Re: Emergency Fund
            DomainDiva Ranger

            Emergency funds should have enough cash in them to pay 3-6 months of expenses...including, house payment, car payment, groceries, fuel, utilities etc. There are several on line savings accounts paying 5% plus interest..ING Orange account is one.

            I f you are starting a new financial plan I highy reccommend Dave Ramseys' "Total Money Makeover". Also there is a neat financial website called Check it out.
            • Re: Emergency Fund
              LUCKIEST Guide
              Everybody should have an EMERGENCY FUND. That is what a saving account is for.
              Are we talking a business emergency fund or a personal emergency fund.
              In business (especially a new business) it should be about 6 months.
              At that point you should have more money coming in than going out.
              Personally, I guess it has to do with employment, age, the size of the family.
              Do you have an insurance agent??
              Hope this helps. LUCKIEST
              • Re: Emergency Fund
                score81 Adventurer
                Rule of thumb says, check your job envirements. Collect data and see how long it takes to get new job of same level. Add 3 more month in it and that is the magic number for that year.
                • Re: Emergency Fund
                  EagleHill Newbie
                  To answer how much a family should have set aside as an emergency fund is impossible to answer without knowing a lot about the family. There are many factors to consider. For instance: how safe are their jobs; how easy would it be to get replacement jobs; what is their debt structure as to repayments required and when; what are their required living expenses; what is the equity in their real estate and have lines of credit been set up; do they have a large stock or other investments portfolio that might have a large unrealized gain in it that they do not want to sell since taxes would be due but they could borrow from using a margin account. Are they near a point where other income would be coming in, such as social security, pension plans, inheritances from a trust, etc,etc.
                  • Re: Emergency Fund
                    Ed O'Gee Adventurer
                    SCORE81 gave the right advice, when I had a corporate sales job that is exactly what I did. I kept 6 months of bill and living money and since sales jobs can be pretty easy to get (salesmen are always in demand) within a month a good sales guy can usually find employement, so I'd add an extra month as well of looking money.
                    • Re: Emergency Fund
                      Lighthouse24 Ranger

                      One approach (as indicated in the posts above) says calculate your family's total expenditures for the past year, and then keep at least one-fourth of that amount (3 months expenses) in an emergency fund that is readily accessible (i.e., you can get the cash quickly, without penalties or interest). If you can save enough to cover six months expenses, that would be even better (because I can tell you from current experience that if you lose your home or business to a natural disaster, being in a position to send ridiculous settlement checks back to the insurance company and hold out until they treat you fairly takes about six months).


                      Another approach (I think it was in FORTUNE magazine a few years ago), recommended that a self-employed individual should have 1 month of expenses on hand for each $10K in income or profit that he/she showed in the previous year. In other words, if you cleared $70K from your business last year, they suggested having 7 months expenses on hand in case of emergency. (There was a rationale behind that number, but I don't remember it in detail. Maybe someone else saw that article?)