
Ask HN: How much to put into a personal emergency savings fund? - theforceawakens
People say 6-12 months. I believe it varies by risk profile and career standing.<p>Did someone just pick a number? What is the math involved? And does anyone have a first hand experience in having to live without any income for 6-12 months &#x2F; essentially tapping in money from the emergency savings?<p>P.S. - I am a programmer, in my mid 20&#x27;s. I can&#x27;t fathom the fact that I need 6-12 months of savings sitting in a money market fund, that earns a few pennies in interest every month. Rather, I would save 3 months of cash. And put the rest in mutual funds (Vanguard low-cost ETFs).<p>P.S. 2 - No car payments, no student loans, no mortgage.
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nostrademons
You want enough that you have a reasonable chance of making adaptations in
your lifestyle if you lost your job. "Adaptations" includes finding a new job,
downsizing to a smaller home or apartment, or moving to a new metropolitan
area.

3 months is taking a pretty big risk. If you're in your mid-20s, you've never
lived through a recession. It is possible to lose your job _concurrently_ with
the stock market losing 50% of its value _concurrently_ with nobody in your
industry hiring for 6-12 months (indeed, that number is often picked so that
you can ride out the worst of a recession). If you have other assets and no
debt, you at least won't be penniless and on the street, but you can be forced
to sell stocks & mutual funds at fire-sale prices and wipe out much of your
net worth if a downturn happens. Or you may end up having to take a job that
sets you back a couple years in career progression rather than being able to
wait for the right opportunity to come around.

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cauterized
I'd set three milestone goals:

1) enough to weather a one-time unexpected event and necessary expense without
going into debt (car needs brakes replaced, dog needs surgery, someone spills
an entire frappuccino into your open laptop, you break a bone and have medical
bills, you need to fly cross-country for a good friend's wedding, etc). For
most people, $1000-2500 is enough for this. Keep it in an interest-bearing
checking account or a "high yield" (yeah, right) savings account that supports
easy transfers to checking. There is a 99.9999% chance you will need this
money in the next 10 years. This is the money that keeps you off the knife's
edge of a debt spiral.

2) enough to live on for 1-3 months of unemployment. Even if you can easily
get a programming job within a month now, that may not be the case if the
startup bubble bursts. And besides, even now you don't want to be beholden to
the first thing you find. If the first job you take turns out in the first
couple months to be a nightmare, you'll need to be ready to handle another
month or more of unemployment while you find something better. Or you can
afford to take a month of vacation to recover from burnout once you've
completed the stressful process of job hunting. This also gives you a cushion
to take small risks like switching specialties or moving to a new city. Keep
this in an easily accessible "high yield" savings account. There is a 98%
chance you will be glad to have this money some time in your life. This is the
money that gives you security.

3) 3-12 months of living expenses. This lets you weather larger life events (a
parent is diagnosed with cancer and you want to stop working and move back to
be with them for the last several months of their life). Or take bigger risks
like moving abroad or going back to school or even switching careers or
starting your own business. Or deal with a severe recession as some other
posters mentioned (the market for programmers seriously bottomed out when the
first dot com bubble burst!) This money can and probably should be invested as
long as it's not in a retirement account with penalties for early withdrawal.
There's an 80% chance you'll want to access at least some of this money some
time in your life. These are the savings that give you freedom.

And yes, I have personal experience of using my savings - I've started a
freelance business that took longer than I'd hoped to reach profitability.
I've founded a startup. I've taken anywhere from three weeks to two and a half
months between jobs, largely voluntarily. Always glad to have these funds.

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hackney
Actually, it is 3 months. Food, rent, utils., ins., gas, pocket money. Adds up
quick. Anybody that has 6 months of all that lying around doesn't need an
emergency fund. Basically it's 25% of your annual net worth.

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willcate
I agree with previous commentor -- I'd recommend 6 months minimum worth of
living expenses, in cash, in the bank.

