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? 

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Why I Think $10,000 Is The Perfect Amount To Have In An Emergency Fund — 23 Comments

  1. Fir us, the number is $25K. We keep that much liquid and easily accessible for the peace of mind associated with owning three different places where people live and stuff can go wrong. (2 units are rentals)
    It’s also a matter of having cash available quickly if the right investment comes along. When we were in property buying mode, there were several times when we were prepared to put money into escrow, and that money had to be available immediately. Not sold from investments and waiting for transfers.

  2. My e-fund is sitting at $10,000. I like nice round numbers, and this would cover about 8 months of expenses. I don’t have kids depending on me, and I don’t have debt other than my mortgage. Basically, the only person I have to worry about is me, so I chose this number in order to divert any extra cash to investments.

  3. My number is around $10,000. Our expenses are pretty low and even if one of us lost our job, we would still be fine. However, if something broke, then the $10,000 would more than likely be enough to cover it.

  4. Well we already know my answer. I guess I should have added what I usually say, which is “you have to do what you are comfortable with.” I also know my situation is different from many people’s since I don’t have a housing payment. If I did, I would probably have more as straight cash. I would probably also hold more cash if I was like the PoPs and had rental properties.

    Also Glad I could inspire some thoughts and talking points! Cheers!

  5. Bf and I have been talking a lot about this lately because want to to buy an investment property and aren’t sure exactly how much money we should have set aside for our emergencies (knock on wood) and our potential renter’s emergencies (which by default would obviously be “our” emergencies). Right now I have about $16k set aside (savings/emergency fund). My retirement is separate and I don’t count that in my e-fund.

  6. I also think $10,000 would be a good number for an emergency fund. I could handle most unexpected emergencies with that much cash, though part of me is like eemusings – it’ll never feel like “enough.”

    I have one question about the “surgery” part. What is your health insurance like? With my insurance, anything over $3,000 ($1,000 deductible, then $2,000 max out of pocket expenses) will be paid 100% by the insurance company. And that’s no matter what the procedure is, you know, as long as it’s necessary and not elective. I was just wondering if your insurance is structured differently since you added the disclaimer that your EF would cover “minor” surgery for you.

    • Good question! I was speaking more hypothetically about that one – my health insurance will completely cover any surgery (I just pay a $10 copay), including a number of elective/cosmetic surgeries.

  7. $10,000 is very close to the amount I arbitrarily picked, though mine is a bit higher because I’ve been in the situation where a few different things went wrong at the same time, financially.

    That leads to the one thing I would caution against, if anything — all of the options you mentioned appear to be pretty correlated. A bad economy might lead me to lose my job at the same time that it hits my portfolio at the same time it makes it harder for me to access credit at the same time it drops the interest rate on my savings.

  8. If we concern about investment then we can’t take it as a part of emergency fund. As we know we are investing properly so that it will be helpful for future. But $10,000 is absolutely sufficient for emergency fund. Beside that you have to invest money separately.

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