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No, emergency fund should just be for emergencies. You don’t want the market to go down and then you have an emergency you need the $ for
Rising Star
HYSAs aren’t investment vehicles. They’re just an FDIC-insured place to stash cash that makes you a little bit on top of their rock-solid security.
What do you mean by emergency fund?
If by emergency fund you mean your 4-6 months of living expenses, then no. The point of the emergency fund is that you don’t touch it unless it’s an emergency.
If you put money on top of that emergency amount into the same HYSA to reduce your overall risk profile for your overall investment portfolio and now want to reallocate that investment to another asset, then sure - go ahead. Do whatever works with your overall investment plan.
But sounds like you were “investing” money into the HYSA before - not that it was an emergency fund.
4 months of income or 4 months of expenses?
Rising Star
Unpopular opinion - a ton of people who post on in this app do not actually need emergency funds.
If that money was instead invested into an allocation of stock/intermediate treasuries, you would earn a greater return in the form of capital appreciation and income. Bonds are negatively correlated with stocks.
If you legit have a real emergency and you need something to pay we these things called..... Credit cards...
If you want to hold cash that's fine... I personally hold $3K in a savings account earning 4% so it works out perfect for me. It's also fine to hold out a couple thousand in cash.
Now if you're heavily involved in real estate investing and own multiple properties, then yes I think it makes much more sense to hold that 3+ month buffed of cash.
Rising Star
SM1 is correct - I use T Mobile Money as one of my accounts.
The reason why most wouldn't need a saving account is that the money that would have been sitting the bank collecting a measly 1% would be instead growing a portfolio with a meaty stock/treasury bond allocation which would be giving you income and appreciate in capital. Stocks and bonds are negatively correlated so having the proper allocation would result in much lower volatility.
For most most emergencies, you wouldn't need have cash 100% immediately like you were robbed at gun point...
It would only take a few business days to sell off bonds equity to receive cash. If you charge it to a credit card, you then buy yourself a month before having to pay in full to make any preparations required before paying that off in full. That includes selling securities..
If you were in a situation where you would have to recognize a LT capital loss if you sold and you did not want to, you could then you use the platform M1 finance to borrow money against your invested capital at 2% to 3.5% and pay it back on your own in terms. The interest you would pay would be offset by the gains you will realize and the interest expense is tax deductible.
The 3 to 6 month emergency fund is general great recommendation that's easy for personal finance people to deliver because it's safe and easy to follow. It's not really an efficient use of your resources though - especially for us in public accounting who have good disability benefits and the ability to locate jobs easier than most people (especially if you're in tax).
Ever since graduating from grad school 8 years ago, I've pretty much maintained an emergency fund of $10K in a bank account. I rarely needed to dip in to it (I think the lowest the balance has been is $7K?). If it was invested in the way I described above that balance would have doubled by now.
Been wondering the same, especially as emergency fund is pretty generous and no short term need for it
Bowl Leader
Is it an emergency fund or is it just excess cash? Figure out what you actually need for an emergency fund and put that in it's own hysa if that helps.
You don't need to invest every excess penny, especially if you have other short term financial goals, but don't confuse it with your emergency fund.
No. Your HYSA isn’t to generate an ROI. It’s purpose is to be there for you if everything else falls apart. If you have 4-6 months, Yog could divert any new savings to the market but I wouldn’t change anything you already have