Why I Think $10,000 Is The Perfect Amount To Have In An Emergency Fund

My post on Friday generated some really good ideas about where to stash emergency cash – as always, I’m so thankful for my amazing readers and their willingness to share their thoughts about all kinds of financial topics. One comment in particular, though, inspired me to think a little deeper about why I think that $10,000 is the perfect amount to have in an emergency fund (for me, at least).

Brian said:

I have $5000 of quickly accessable cash between 2 credit unions. Other than that everything else I have is invested. If I ever needed more than the $5K I could use a CC to pay for the “emergency” and then sell some assets from my taxable account. I personally don’t see the point in having such a large amount of cash doing nothing for me (that’s not even taking into account the fact that inflation is actual killing that money slowly).

Up until recently, I would have whole-heartedly agreed with Brian. And to a certain extent, I still kind of do. I think that deciding on a certain number to have saved as “quick cash” for emergencies, then investing the rest is the way to go. Money in savings accounts is doing nothing and it is being eaten away at by inflation. It’s just that $5,000 isn’t quite enough for me, at least not anymore.

The main reason that I want to plump up my emergency savings is that someday in the not too distant future I want to become a homeowner, which means I’ll need to be prepared for large, unexpected expenses. Certainly, some of these expenses could exceed $10,000, but if that’s the case I’ll do just as Brian says and dip into taxable investments to cover the tab.

But in the near term, $10,000 could cover a lot of other big stuff. Here’s what springs to mind immediately:

  • A cross country move 
  • Serious dental work
  • A trip to Europe 
  • A new-to-me car 
  • A downpayment on a house in a small U.S. city
  • A surgery for my cat (or myself, if it was minor)
  • Six months of unemployment 
  • Several large financial gifts to friends or family members in need

Of course, some of the things on this list are decidedly not emergencies, but the point is that $10,000 is a large chunk of change that could cover some pretty hefty expenses. The idea of just being able to reach into my pocket and pay for some of these hypothetical wants or needs – without having to touch investments, which are busy growing to provide for my future – is empowering to me. In other words, $10,000 just feels good to me.

What about you? How much emergency cash feels like the right amount for you? Do you count your investments as part of your emergency fund?