One of the great parts about our couples blog is that we don’t always agree on everything related to finances. Our readers then get to hear us hash out both sides of the issues. In response to James’ posting yesterday, I would have to say that I both agree and disagree.
I would agree with putting most of your emergency funds in a higher yield mechanism such as the stock market. Liquid enough, but also still making money.
I would, however, disagree that all of your money should be put there. I do see the merit in having some cash set aside for those true times of emergency. Otherwise you are simply putting too much faith in the system and aren’t taking in to account the realities that are likely to occur in times of an emergency, i.e. atms not working, etc.
I do admit that all of this is easier said than done. I’ve felt this way for the past number of years, but if you look in my money market account you won’t be seeing extra cash piled up there. It’s not always as easy as it sounds to follow your own advice.
Currently though I have my emergency cash in just that, cash. Being here in Afghanistan it is simply more practical to keep some extra in cash. At home I would normally try to keep an extra twenty tucked in my purse or desk at home and at the office for this times when you just might need it.
If push comes to shove I also have credit cards that I could use in an emergency and then pay off with stocks sold. James doesn’t currently have a credit card, so he could be in a bit of a bind, depending on the situation.
I think the issue here is to take a close look at what you would do in the case of a true emergency, or in times of sickness or layoffs. Stocking away all of your extra money in 401(k)s may make sense in some ways, but you have very little flexibility. Considering that much of my life has been spent traveling, I consider it in terms of how I would get out of dodge of the $*%! hit the fan. This isn’t a bad way of thinking of it no matter where you live.
I’d love to hear from our readers on what their approach is to emergency funds, and how those are maintained.
Cheers,
Miel
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