Comments on: Specialized emergency funds

By: Emergency Funds For Different Kinds Of Emergencies | Frugal Dad

Emergency Funds For Different Kinds Of Emergencies | Frugal Dad — Mon, 08 Jun 2009 10:01:23 +0000

[...] inspiration came from a post I read over at Gather Little By Little about creating specialized emergency funds. I liked the idea of dedicating a portion of money to a specific emergency situation, and the idea [...]

By: Friday Linkfest: Still Without Hot Water Edition | beingfrugal.net

Friday Linkfest: Still Without Hot Water Edition | beingfrugal.net — Fri, 29 May 2009 11:01:21 +0000

[...] Specialized Emergency Funds – Gather Little by Little [...]

By: glblguy

glblguy — Fri, 29 May 2009 09:53:31 +0000

@Craig – yes, emergencies and vacations are very different. Would hate to see you return from vacation only to have an emergency you couldn’t pay for.

@Maggie – That’s how emergency funds work, it’s always more peace of mind than need right up until you need it…which you will.

@Carol – Great concept, and no I hadn’t heard of her, but I do have those kinds of accounts as well for my property taxes and Christmas expenses

Regarding the number of accounts, for me it’s just as easy to keep multiple ING Savings accounts than manage yet another spreadsheet. With ING you can literally create a new account in 2 minutes, so why not?

Thanks for all the great comments!

By: amy

amy — Thu, 28 May 2009 17:14:07 +0000

We keep our “emergency” and “sinking” funds in ING. It’s
all in one account but I keep track in a little notebook
how much is allocated to things like emergencies, car fund,
Chrismas fund, insurance, etc. We are saving up a 6 month
emergency fund for the catastrophes and also have one month
living expenses in the checkbook. It works pretty well.

By: Brian

Brian — Thu, 28 May 2009 16:45:36 +0000

I agree with Thankful. It is definitely easier for me to keep a handle on with all separate accounts. It creates more transfers, etc, but it is easier than teasing it all out from one account. I also just started this system last fall and it really helps me. I have a buffer in the accounts for unexpecteds and all I need for regular things too. With ING and HSBC it is really easy to set up extra accounts to do this. I love it.

By: Thankful

Thankful — Thu, 28 May 2009 15:58:01 +0000

I keep separate emergency accounts — I find that it’s almost more work to track one account for various needs. I also use the specific emergency funds as sinking funds for annual and semi-annual payments, with the leftover building a buffer as Brian mentioned above. Except a small “local” emergency fund as a couple of others mentioned, we have all of our savings at an online bank.
- efund
- travel (we go to a LOT of out-of-town weddings)
- insurance (auto, our home is escrowed through mortgage company)
- car (payment, repairs, emission tests — just this month it came in handy!)
- pest control (termite bond and other services)
- home maintenance (just started this one)
- credit card holding (some of our CCs will only take 3 online transfers per month, and we have an amex we pay off every month in full, so every couple days I transfer the transactions on that card from checking to CC holding so I can earn interest while I’m waiting for the bill to arrive)

We just started transitioning to this system last fall, it’s given me a lot of clarity in planning.

By: Carol

Carol — Thu, 28 May 2009 15:39:13 +0000

Have you heard of Mary Hunt? She recommends what is called a “Freedom Account”. It is basically a checking account that has funds for car repairs, vet bills, insurance payments, and other irregular expenses. Just figure out the yearly amount due for all these and divide by 12. That’s the amount you need to put into this account to pay them when they come due.

By: Do You Dave Ramsey?

Do You Dave Ramsey? — Thu, 28 May 2009 01:30:09 +0000

This is an interesting topic… I typically like to keep only a minimal amount of cash accounts and then allocate and manage their holdings via a spreadsheet.

But sometimes there’s a good reason for an exception. Once I get back to work – I start a new job on Monday! – and rebuild my Emer Fund, I plan to keep the dollars completely seperate. Likewise my Known Annual Expenses (car insurance and registration, HOA dues, season tickets, etc) will be seperated into a Cash Account with each sub area managed via excel.

In my current situation I’d then have 3 accounts – checking, cash, emer.

In the situation you mentioned I agree with your approach to add a 4th account for the rental house or ‘business’ you’re running. I’d hope to stock it with at least a month’s mortgage and then a few extra dollars for other expenses. I like the idea of parking the monthly income into this account to help build it up and then once you’ve collected 2-3 months worth of mort payments, I’d start redirecting the income towards debt or something else.

Hey, cool topic, thanks for sharing!
Dave

By: Marie

Marie — Wed, 27 May 2009 22:52:57 +0000

I thought long and hard about where to balance complexity and separting things out. Here is our compromise – 6 ING savings accounts.

A – Emergency Fund (catastrophes, unexpected house repairs, obscene medical bills)
B – Escrow account (for any bill that doesn’t come monthly)
C – Christmas/Vacation Fund
D – Car Fund (handles all car repairs and is where we put our savings to purchase a new to us vehicle, we don’t do car loans)
E – Husbands Fund (anything he is saving up to buy)
F – Wife’s Fund (dido)

It still feels like one to many accounts but yet it is the right balance for us. Its very flexible to accomodate vacations, Flat Screen TV goals – etc. We just put it in an existing savings account.

By: Stephanie S.

Stephanie S. — Wed, 27 May 2009 22:45:59 +0000

I have a $1,000 ER fund in our local bank savings account for whatever, it’s easy access that way.
On ING I have a travel savings account, another for bigger emergencies and household repairs/improvements, and one for unexpected pet care.
We will be starting one for a car next year.
I also have another one that I put extra money in and then send it off to the credit card companies.