Update 11 April 2011
40% will not use their emergency fund to invest while 60% will have no problems using it for investment. What's surprising is that 30% or half of those who will use their funds to invest are willing to use at least half if not all of it. I am not sure if age plays a part. Surely, if you are a retiree, you won't use all your emergency funds to invest ya? Another possibility which I can think of is the definition of a emergency fund. To me, a emergency fund is to tide me over for a sudden critical expenditure e.g. accident, operation or a sudden loss of income etc. Maybe others few it differently? I also wonder who is the other person beside La Papillion to vote other?
I don't think there is no right or wrong here. Maybe a expert here could enlighten us on what really is an Emergency Fund and what should it be use for?
I had a short but interesting discussion on this topic in La Papillion cbox last night.
Almost all financially planning talk about having an emergency fund of X no. of months to tide you over a rainy day e.g. accident, out of job etc. While most agree on the importance of such a fund, there are a few who have no qualms in using the emergency fund for investing when the opportunity arises. I have a hunch that in a super bearish market, the same people will not hesitate to utilize all their emergency fund!
It will be interesting to see if readers here share their same views. As for me, I hold a more conservative view. I will not use more than half my emergency fund for investing.
Feel free to cast the vote for your friends too; the end results might come as a surprise.
Thank you to all who has participated in the poll. To have over a hundred of you is encouraging and I hope that the numbers will increase further in future polls.
If you have a poll/survey relating to Finance or Investment and you would like to use this site to reach out to a greater audience, feel free to contact me and we can discuss further.
Beware of Greed and Overconfidence as they may kill investors. Dipping into our emergency fund to invest is an obvious display of greed and overconfidence in us.
I’m the one who put ‘others’. I think it depends on how fast you can replenish the cash fund with your monthly cash inflow. If you keep a savings ratio of 50%, then for every month that you save, you can actually put aside 2 months of expenses, it’s actually quite conservative to use more than half of your emergency funds.
Have I used it before? Nope. But I did use the savings I reserved for wedding and renovation into stock market (but not during bear markets).
Interesting point of view. I guess everyone has a different view on what a emergency fund can be used for.
Let’s say you have a saving ratio of 50% or more, would you use all of your emergency fund to invest or use more than half your emergency fund?
We must also bear in mind that we are forecasting that we will still have at least 50% or more savings in the next month. In the event of an emergency, we may not even have any income to save for the following month. Hence, if we used up all our emergency fund, and we have no income for the next month, we may be in trouble.
I think emergency fund is not saving so don’t mix them up.
I have four bank accounts.
1 – For living expenses and GIRO
2 – For Emergency Fund (3 months in conjunction with FD period 6/12 months)
3 – For Investment and Trading
4 – Fixed Deposit (Mid Term Saving)
With the 4 bank accounts, you are absolutely clear on the money movement and transactions and also easier to maintain records tracking by downloading monthly statement from the banks.
If I have a savings ratio of 50%, then I’ll use perhaps 4 months knowing that in the next 2 months, I can replenish it back.
BTW, my emergency fund should comfortably include up to 6 months of income, not expenses. So going by that, I’ll have 12 months of expenses. Take 4 months out is reasonable I would think.
40% will not use their emergency fund to invest while 60% will have no problems using it for investment. What's surprising is that 30% or half of those who will use their funds to invest are willing to use at least half if not all of it. I am not sure if age plays a part. Surely, if you are a retiree, you won't use all your emergency funds to invest ya? Another possibility which I can think of is the definition of a emergency fund. To me, a emergency fund is to tide me over for a sudden critical expenditure e.g. accident, operation or a sudden loss of income etc. Maybe others few it differently? I also wonder who is the other person beside La Papillion to vote other?
I don't think there is no right or wrong here. Maybe a expert here could enlighten us on what really is an Emergency Fund and what should it be use for?
I had a short but interesting discussion on this topic in La Papillion cbox last night.
Almost all financially planning talk about having an emergency fund of X no. of months to tide you over a rainy day e.g. accident, out of job etc. While most agree on the importance of such a fund, there are a few who have no qualms in using the emergency fund for investing when the opportunity arises. I have a hunch that in a super bearish market, the same people will not hesitate to utilize all their emergency fund!
It will be interesting to see if readers here share their same views. As for me, I hold a more conservative view. I will not use more than half my emergency fund for investing.
Feel free to cast the vote for your friends too; the end results might come as a surprise.
Beware of Greed and Overconfidence as they may kill investors. Dipping into our emergency fund to invest is an obvious display of greed and overconfidence in us.
Hi derek,
I’m the one who put ‘others’. I think it depends on how fast you can replenish the cash fund with your monthly cash inflow. If you keep a savings ratio of 50%, then for every month that you save, you can actually put aside 2 months of expenses, it’s actually quite conservative to use more than half of your emergency funds.
Have I used it before? Nope. But I did use the savings I reserved for wedding and renovation into stock market (but not during bear markets).
Hi Bro8888,
Thanks for your view. Would you care to share what your emergency fund is used for?
To cover lost of income due to out of job. Out of job also mean no medical coverage too.
Hi LP,
Interesting point of view. I guess everyone has a different view on what a emergency fund can be used for.
Let’s say you have a saving ratio of 50% or more, would you use all of your emergency fund to invest or use more than half your emergency fund?
We must also bear in mind that we are forecasting that we will still have at least 50% or more savings in the next month. In the event of an emergency, we may not even have any income to save for the following month. Hence, if we used up all our emergency fund, and we have no income for the next month, we may be in trouble.
I think emergency fund is not saving so don’t mix them up.
I have four bank accounts.
1 – For living expenses and GIRO
2 – For Emergency Fund (3 months in conjunction with FD period 6/12 months)
3 – For Investment and Trading
4 – Fixed Deposit (Mid Term Saving)
With the 4 bank accounts, you are absolutely clear on the money movement and transactions and also easier to maintain records tracking by downloading monthly statement from the banks.
Hi Derek,
If I have a savings ratio of 50%, then I’ll use perhaps 4 months knowing that in the next 2 months, I can replenish it back.
BTW, my emergency fund should comfortably include up to 6 months of income, not expenses. So going by that, I’ll have 12 months of expenses. Take 4 months out is reasonable I would think.