Emergency Fund question

[Anonymous]

Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

[Anonymous]

I would buy Voo on red days and not even bother with a savings account. When you need the money, you get to choose the cost basis and it's also long term after a year.
Just did the math and if you had put $1k a month into Voo the last year to build you emergency fund, you would have made a lot more than what savings accounts pay.
The money in savings account is making money for the bank while you get 5% max. You can use your own money to make money.

[Anonymous]

Anonymous wrote:I would buy Voo on red days and not even bother with a savings account. When you need the money, you get to choose the cost basis and it's also long term after a year.
Just did the math and if you had put $1k a month into Voo the last year to build you emergency fund, you would have made a lot more than what savings accounts pay.
The money in savings account is making money for the bank while you get 5% max. You can use your own money to make money.

I’ll look into that. Thanks!

[Anonymous]

Assuming that "MM" = an FDIC-insured money market account, then, yes, of course. With the provision that I would only keep as much in that account as would be covered by FDIC insurance ($250k), and would open additional account(s) as needed.

[Anonymous]

What is Voo?

[Anonymous]

Anonymous wrote:What is Voo?

It’s the stock market.

No, OP, you should not keep your emergency fund in the market when you only have three months of it.

[Anonymous]

Anonymous wrote:What is Voo?

S&P 500 mutual fund.

[Anonymous]

Anonymous wrote:Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

How much is in your checking account? If you don’t keep 3months of expenses in there how do make sure it doesn’t bottom out due to timing of when bills land?

[Anonymous]

We have some of our emergency funds in a MM. We also have some in HYSA. Yes the rate could decrease but you won’t lose money.

We have VOO but we don’t consider it part of emergency funds. It’s possible to lose money in VOO and that’s not point of emergency funds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I would buy Voo on red days and not even bother with a savings account. When you need the money, you get to choose the cost basis and it's also long term after a year.
Just did the math and if you had put $1k a month into Voo the last year to build you emergency fund, you would have made a lot more than what savings accounts pay.
The money in savings account is making money for the bank while you get 5% max. You can use your own money to make money.

I’ll look into that. Thanks!

Do not do this. This is called “market timing” and it is prone to losses, regardless of what this poster says.

[Anonymous]

Anonymous wrote:Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

Instead of a savings account, move it into a brokerage and invest in a MM fund. MM funds pay better interest than most banks and don't lose value. Once you save beyond your emergency fund goal (3 or 6 months), you could just invest in the market (e.g. VOO) from the same account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

How much is in your checking account? If you don’t keep 3months of expenses in there how do make sure it doesn’t bottom out due to timing of when bills land?

Not OP, we generally keep 1 month of bills cushion in our checking account. Since our paychecks go to checking and are more than our monthly bills, that's enough cushion. Monthly we move the surplus to our emergency fund, and then every 6 months or so evaluate how much is in the emergency fund and if it grows enough, where to put the extra- right now it's all into the kids 529s.

That's all after doing max 401k/Roth contributions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

Instead of a savings account, move it into a brokerage and invest in a MM fund. MM funds pay better interest than most banks and don't lose value. Once you save beyond your emergency fund goal (3 or 6 months), you could just invest in the market (e.g. VOO) from the same account.

My HYSA has a higher interest rate than MM.

[Anonymous]

I have some of my emergency fund in a MM account. I also have some in a lower-interest rate savings account that gives me quick access to it. I keep enough in the savings account to cover regular emergencies (like car tires, minor home repairs). The savings in the MM account is for the bigger but less likely emergencies (like job loss).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ever since we married, we have tried to keep 3 months of expenses in cash in a savings account. We also could float another two months through credit and selling some property if needed.

Would you put any of your emergency fund in a MM account?

Instead of a savings account, move it into a brokerage and invest in a MM fund. MM funds pay better interest than most banks and don't lose value. Once you save beyond your emergency fund goal (3 or 6 months), you could just invest in the market (e.g. VOO) from the same account.

My HYSA has a higher interest rate than MM.

Which HYSA is beating (net of state taxes) Vanguard's Treasury MM at 4.22%?

https://investor.vanguard.com/investment-products/mutual-funds/profile/vusxx