How much liquid cash should you have ?

[Beginning]

Just curious ... what is the suggested liquid cash that a family (including young kids) should have on hand ? Is it three months' worth of expenses (rent / mortgage, groceries, gas, clothing, electricity, etc) ? Six months' ? A year ?

Please advise.

TIA.

[LivingAlmostLarge]

Depends. Stable jobs maybe 1-3 months. Self-employed? single income? Maybe 6 months. Have taxable accounts? maybe 1-3 months. No other savings? Maybe more. Too many factors.

[kork13]

I would say at a minimum, you should keep 3 months' total expenses. Preferably, 6 months is better. Of course, those are general rules of thumb. More importantly, you want to keep enough cash to make you feel safe. For some, that does indeed mean 1+ year's worth of expenses.

For me, that minimum figure seems to be around 4 months' expenses... I've found that if/when my cash drops below that level, I start to feel more apprehensive about my financial situation. As I focus on building up cash & raise that amount back up toward 5-6 months, that anxiety goes away. I've recognized this only after a few iterations of my cash balance floating up & down over time. So finding the exact amount you need takes time & experience. But until you can identify what works for you, these rules of thumb are a good starting place.

[AJ444]

It really needs to be catered to your personal situation, comfort level and stage in life.

When I was single my goal was a 6 month emergency fund but I couldn't get there. Had I lost my job I would have struggled to make my mortgage payment on unemployment.

When DW and I first got together and paying two mortgages our goal was also 6 months because of the double mortgage payment and with 1 job loss we would have struggled.

When DW and I were able to bring cash to the table to sell her house and we were left with one mortgage with no taxable investments we had a 3 month emergency fund.

Now that are able to meet our monthly bills with one of our salaries and we have a sizable taxable account we only maintain a 1 month of expenses cash "buffer".

If I had kids and a mortgage with no taxable investments I would likely strive for at least 6 months.

[bigdaddybus]

I think it depends on your risk appetite.

personally I have:
1. 1.5 months of living expenses in cash
2. then 3 months living expenses could be covered by my two credit cards
3. then 1 year + is available in my taxable investment accounts. If sh*t hit the fan, I would burn thru cash, start utilizing credit until I could sell off some stock to get the cash (1 week turn around)

thankfully I haven't had to do that ^^^

[disneysteve]

I think a minimum of 3 months of basic living expenses should be everyone's plan. How much you need liquid beyond that really depends on your situation.

[snafu]

As explained, an Emergency Fund [liquid cash] is best based on your specific circumstances. If you are just starting an EF, it's important to save $ 1,000. cash for unanticipated, short term problems like cash needed for vehicle repair, toothache, fridge stops working etc. I also keep a 'float' in my chequing account to avoid accidental overdraft, NFS etc to avoid monthly bank charges and specifically to avoid fees for most of the services I use. [ $ 30. x 12 = $ 360. annually]

Part II considers the stability of income. What is the likelihood of losing employment or any regular source of income?
As stated, you need to be able to fund a minimum of 3 months of basic expenses like rent/mortgage, loan payments, vehicle operation, insurance & maintenance, utilities, food, phone. Presume you've cancelled non necessities like cable and general entertainment.

I hope you'll consider developing an EF

[msomnipotent]

I only have about a month's worth on hand. I have several months worth of food and toiletries just because I buy in bulk a lot. Most of our emergency cash is tucked away in an internet account that would take a few days to get my hands on just so we don't buy an emergency 60" TV.

[bjl584]

It depends what you are trying to do.

I'd say that having at least 3 months of an Emergency Fund is a good idea. Beyond that, it depends on your plans and goals. Are you in the market for a house? A car? A vacation? An investment property? Plan and save accordingly.

[Kaoru]

in addition to liquid cash, I always make sure I have a line of credit I can draw upon in case of emergency. LOC is one of those things that are easy to get UNTIL you need it.

[sweetlady2k]

Just be aware it might take well over 3 months to find a job if you lose yours. I think 3 months is a good start but I personally won't feel comfortable until I have 6 months to possibly a year.

[Fishindude77]

I wouldn't be comfortable without easy access to at least $100K, meaning stashed in a basic checking / savings account. If you want to get "a little" interest a CD ladder is a good idea.

[Gailete]

Most of our emergency cash is tucked away in an internet account that would take a few days to get my hands on just so we don't buy an emergency 60" TV.

LOL! So true! It is amazing how easily it is to talk yourself into things like new TV's. When my spendaholic ex and I split up, he bought himself the most expensive single wide mobile home the the company had ever sold as he went for all the bells and whistles, NEW furniture, a NEW huge 6 foot I think it was TV, and NEW miscellaneous stuff. Oh and a used motoercycle that I'm not sure he ever go running. So on top of the credit card bills that were his to pay off, he had bought another $60K of stuff all on credit. And HE, at least, managed to justify it all.

[Gailete]

I wouldn't be comfortable without easy access to at least $100K, meaning stashed in a basic checking / savings account. If you want to get "a little" interest a CD ladder is a good idea.

I would love to have that much, but I don't. I'm not sure I would feel comfortable to even have that much not invested in some way to earn more than the lousy interest we get these days. I remember when around 5% was standard for a savings account, not this .01% nonsense. Don't know why the banks bother. I can see if I had it, having Maybe up to $25K in cash, but that is about all.

I do have multiple accounts that are set aside for specific things. One of them has between $3-4K in it in cash. I also have my stock fund and my retirement accounts that if I need to tap them to stretch out my SS checks, has enough to keep us going for at least 2-3 years. This I might remind you folks is 100% more than we had about 10 years ago.

[Danielvalerio506]

Depends. Stable jobs maybe 1-3 months. Self-employed? single income? Maybe 6 months. Have taxable accounts? maybe 1-3 months. No other savings? Maybe more. Too many factors.

You´re right it depends on what you do.
Stable jobs let´s say 1-3 months.
If you are self-employed let´s say for example a real estate broker you know that it is not a guaranteed income so I would say a year of expenses would be fine. Always thinking aswell in your health condition. I´ve seen people that have a lot of money and investments but for some reason end up in the hospital for 6 months and they then struggle a lot because they didn´t have any cash on hand.