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What is a recommended amount to keep in our emergency fund?

I am 27 years old and recently married. My wife and I have steady jobs and make around $150K of joint income. We both have put an importance on savings and investing for goals down the road, such as raising for a family and an eventual home purchase. While we save and have liquid funds to support our current needs, how much should we have stashed away in a liquid emergency account? What kind of account do you recommend and how much should we have in it? Do we factor in our plans to have children down the road, or should we just have a certain amount for the both of us in case of an emergency?

Financial Planning, Asset Allocation
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March 2017

My own personal standard for an emergency fund is one year of expenses. This is a minimum, I am actually thinking about increasing it to two years.

I have learned from experience that it takes one to two years to recover from a serious financial/business setback. Bear in mind, we are talking about something major here that results in a substantial loss of income, and which will require some rebuilding to get back to normal.

I don't want to have to dip into my retirement or investment accounts in this situation. I want to depend exclusively on the reserve fund, and let it do its job. So, I think it's better to over-fund it, as opposed to under-fund it and jeopardize my other monies.

I use a simple cash account with my broker. No fees, no interest, and liquid. If I needed the money in two hours, I can get it.

As my cash picture changes, the role of this reserve fund will change. In my next stage of life, I may want it to be larger. Or, if I reduce my expenses, it will be smaller.

April 2018
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