Comments on: Do Credit Cards and Stocks Make Up Your Emergency Fund Savings?

By: Gilbert

Gilbert — Tue, 19 May 2009 20:46:25 +0000

I don’t think there is anything wrong with using credit cards or 0% balance transfers or even your stocks and mutual funds as your emergency backup plan. That’s what they are there for. You use them for day to day transactions (credit card rewards) and for long term rate of return growth (stocks and bonds), but in the worst case scenario when you fall on tough economic times, they are there to either offer you a temporary revolving credit loan or allow you to cash out your positions for some instant spending money.

This is also why especially in this crappy economy and credit crisis right now, it’s even more important to monitor your fico credit score and find ways to boost your credit score for the better. Believe it or not, your fico score and credit scores are your vital life lines during a financial emergency. They determine whether you’ll get immediate access to critical debt based funding during desperate times. Hoarding a ton of cash to weather unpredictable scenarios is not always feasible.

By: Zeke

Zeke — Sun, 07 Sep 2008 03:30:16 +0000

In India, Malaysia, and some other places in that region it is customary for the wife’s earnings or savings to be hers alone (no contribution to household needs). Whatever she manages to accumulate becomes her emergency fund. She may use it in case of divorce, which might otherwise leave her destitute; or she might use it for a family emergency.

While I am not Malaysian, my wife is, and I have always encouraged her to adhere to this model. She currently has assets in the range of $100,000.

By: traineeinvestor

traineeinvestor — Thu, 04 Sep 2008 03:44:38 +0000

For most people this is the right approach to an emergency fund. However, leaving cash in the bank is wasteful. In the right circumstances it is better to have the emergency fund in higher returning asset classes amd/or rely on credit cards. The right circumstances would include:

1. dual income household
2. high savings rate
3. good job security (or at least a reasonably long notice period)
4. a long enough time horizon to recover from any set backs

We are fortunate enough to have all of these working in our favour and concluded that an emergency fund would be a waste.

By: jay

jay — Thu, 19 Jun 2008 13:25:59 +0000

I have restructured my own finances over the last two years bringing my CC debt down from $12k to $3k using 0% balance transfer. One thing I have not really contemplated is an emergency fund, I am ‘banking’ on clearing my debt before the next ‘emergency’. The way I see it, I will be better off off-setting an emergency fund against my debt – once I am debt-free I will probably then go after my mortgage rather than have excess savings…