Emergency Fund Etiquette
3rd May 2008
I think this blog makes me forget my manners, because occasionally I start talking out of line at work or with friends about their money situations.
The real kicker is when my friends talk about their credit cards. I want my friends to be happy, healthy and debt-free, just like me. I explain to them that they don’t need a credit card. I get a blank look and a question about what I do when I don’t have the money. Here’s what I say:
“I either don’t buy it or I use my emergency fund.”
Then, I get an even blanker look. I haven’t done the research yet, so I’m not really sure if the blank look is because people don’t understand the concept of not buying things or if they don’t understand the emergency fund. Then, I get asked, “How much do you keep in your emergency fund?”
Here, I usually falter, because I realize I’m in an uncomfortable situation. See, these people owe money to other people because of their “emergencies”. I have emergency money in a fund above and beyond what I’m going to spend every month. That puts me on a higher financial ground. But I’m honest and I tell them, “$10,000.”
This is when I get the blankest look of all.
Mind you, I don’t have the 4-6 months recommended, but $10,000 sounds like a lot of cash lying around to the other person who is probably mortgaged, carloaned and creditcardcharged to the hilt. It hurts me to even think about it.
So, this conversation happens to me about once per year, and I don’t like it. How can I approach it better? I want my friends to have emergency funds. It’s a great peace of mind, as I stated in my article over at Gen X Finance.  I’ll ask it here, since it’s allowed:
How much do you have in your emergency fund? How do you address money conversations with colleagues and friends?
May 3rd, 2008 at 1:56 pm
I can’t even talk to my friends and coworkers about emergency funds because I think I would go mad. I have people who do not care what their credit scores are…who buy expensive vehicles because the ‘monthly payments’ are low…who are constantly late on credit cards and other bills and who think unpaid bills just drop off your record if you ignore them.
These people keep money in checking accounts that pay zero interest and they have no interest in ING or any other online bank because they do not trust them.
I recently started talking to a coworker about how to access her free credit report because she wants to buy a house. She was surprised at what she found on her credit report and although she is in a two income household they have just found that they have no cash flow that is positive because they waste so much.
May 4th, 2008 at 12:55 am
I have $1,000 in my ‘every day emergency’ account. It’s my buffer that keeps me out of my ‘oh my god the world fell apart’ account and other savings accounts. 18 months ago I was one of those with the blank faces and the car loans and the credit card debts. In that time my zeal for financial independance has taught me that you have to really want that financial independance to achieve it. It’s a lot of work and huge lifestyle changes occur as you try and change habits of a lifetime. It means renegotiating relationships with friends and family. Most people don’t really want it that much, they find the changes more uncomfortable than the situation they are in. If people ask about what we have, I mostly tell them that they don’t want to know. If they really want to know I’ll tell them. It’s embarressing how excited I get when I find someone to talk personal finance with!
May 4th, 2008 at 2:29 am
We keep $20K in our emergency fund. It’s more than I would like to keep in there, but my wife prefers very liquid, no risk investments, so there it sits.
I have commented before about dealing with co-workers when it comes to financial topics and my opinions remain the same. The best way I have found to handle it is to just stay out of it and don’t try to keep a financial conversation going if I end up in the middle of one.
However, you did mention credit cards and how you “explain to them that they don’t need a credit card”. It may be better for you to try to get them to pay their credit card in full rather than disuade them having cards. Credit cards offer a level of convenience, rewards, and buyer protection that other payment types don’t. Trying to help someone think before they buy is more important to me than the type of tender they use in the purchase.
May 5th, 2008 at 1:59 am
I used to tell people I have 2 years living expenses lined up - its my F*** YOU! money in case I don’t like what my boss tells me!
of course, my boss was great and always used to joke about why i bothered coming into work everyday. everyone knew that i knew A LOT about real estate and the execs even asked me to help them with the the problems they were facing with leasing another building. I fixed it for them!
May 5th, 2008 at 7:29 pm
“I explain to them that they don’t need a credit card. I get a blank look ”
same here!
I keep a few of thousand liquid and the rest I invest in the market
The next time you should ask them this question , “how much money do you need in the bank to not use that credit card”?
Most will give a modest amount, and then let them know how about saving that money? you may or may not get a blank stare, but at least you get them talking
May 6th, 2008 at 1:31 pm
I have $5000 in my emergency fund. Sort of. I know I will not let myself touch the $5000 unless I’m desperate. I have access to more than that right now. Honestly I don’t have an official emergency fund, but I’m trying to break down my savings to make one. I try to keep my networth at over $20k at all times (aiming for $30k by the end of 2008), with at least $5000 of that being liquid in a high-interest savings account, not including any money I owe for taxes. I should probably make that $10k, and at some point I will, but right now I could live off a few months on $5000k if I just eat and live in an apartment and ride my bike everywhere (worst comes to worst) so I think it’s ok.
May 6th, 2008 at 9:21 pm
I keep $3k, and I almost never use it, and am sure to top it back up if I do. I can’t imagine using a credit card instead of this bundle of cash. I can borrow from myself for nothing!….kind of.
May 7th, 2008 at 12:25 pm
[…] That is something I have to learn too, Dollar Frugal discussed Emergency Fund Etiquette. I don’t mind talking about my own emergency fund or discussing approaches to having, managing, or using an emergency fund but I can be very direct and one-sided because my own experience is different than yours. In the end, the bottom line is still the same, have an emergency fund no matter what. […]
May 8th, 2008 at 5:35 pm
We have one year expenses in our fund. We just feel more comfortable that way. I try not to talk money with people outside the blogosphere, they just don’t understand and get annoyed.