Like i mentioned earlier we do not hold a large sum in emergency funds, but the fund is used only when their is an UNEXPECTED cost, like a major car repair or major cost for anything that we have not accounted for.
All of the above for me! I basically build up a reserve for the time that I need it. If the reserve gets relatively large, I'll make lump sum RRSP or mortgage payments.I'm curious how people use their emergency fund? Do you only use it for times when you are unemployed? Do you use it for car repairs? What about house repairs?
Do you begin saving for repairs that you know you are going to need like a new roof? Do you just wait until you need a new roof and hit up the emergency fund?
Basically do you save in advance for capital expenditures or do wait and use you emergency fund to pay for it?
This a good question. I would say that all the reasons that you gave are what my wife and I use our emergency fund for - capital expenditures as well as potential unemployment. However if I had to pick one, I would say our emergency fund is more for the latter.I'm curious how people use their emergency fund? Do you only use it for times when you are unemployed? Do you use it for car repairs? What about house repairs?
Do you begin saving for repairs that you know you are going to need like a new roof? Do you just wait until you need a new roof and hit up the emergency fund?
Basically do you save in advance for capital expenditures or do wait and use you emergency fund to pay for it?
I have never used up my emergency fund...I'd have to be laid off and exhaust my savings first...
I appreciate where you are coming from, but is an emergency really the time to get in debt. Maybe you lose you or your spouse lose your job, not only is this a bad time to get in debt, but banks might reduce your line of credit. Remember that line of credit is not guaranteed and terms can change at anytime. I understand the chances of this maybe low, but that is the whole point of this.This goes against what everyone says you should do, but I don't have an emergency fund and never have. I want my money to be working for me, so the most I leave in a non-investment account is maybe $1,000 to pay off my monthly cash-back credit card that I use for everything. If an emergency comes up, I tap my line of credit at 5.75%; I think it's more advantageous to allow my investments to continue their uninterrupted compounding than to pay a slight bit of interest for a couple of months. Even if I needed 10k- it's only $48/month to borrow it from the LOC and I always repay it as fast as possible. I'd lose more than that in growth by tapping an investment.
If the banks would pay more than a ridiculous 0.25% (often MUCH less) or whatever, then I might leave more laying around.
I agree completely, this is my philosophy as well. The current low rate environment punishes savers of cash. If an expense of greater than $3k were to come along, I would borrow for 1-2 months. If the event was greater in scope, I have $27k in my TFSA and over $100k equity in my house that I could tap. The opportunity cost of having cash sitting around for rare events is simply too much for me.I don't have an emergency fund and never have. I want my money to be working for me, so the most I leave in a non-investment account is maybe $1,000 to pay off my monthly cash-back credit card that I use for everything. If an emergency comes up, I tap my line of credit at 5.75%; I think it's more advantageous to allow my investments to continue their uninterrupted compounding than to pay a slight bit of interest for a couple of months.
This is exactly how we do it. That way emergency funds would be used for unemployment, I can't think of anything else at this time but anything could happen of course.I have a "car repair" account for unexpected maintenance, a "house repair" account for the same thing, a "pet account" for emergency vet bills and then my "emergency" account would be if either my husband or myself became unemployed. I find that keeping them seperate helps me remember the ongoing maintenance that isn't necessary unforseen to the same degree as a job loss.
I think of the repair accounts as accounts that I am able to withdraw from, where the main emergency account is invested in easily accessible investments for unforeseen job loss scenarios.
So in answer to your question, if I knew the roof was going to need to be repaired in 3 years, I would get an estimate and bump up the house repair account.
That's pretty much our approach too, although we don't have as much money in our war chest. I view a carrying a credit card balance as an emergency, so in the (very) rare instances where I've had to put more on my card than I can pay off in a month, I dip into the fund for that.We just keep a great big "War Chest". It's a full year salary for the pair of us. In there is money in case the furnace breaks, or if we need a new car, or if one of us loses our job.