Personal/household Rainy day fund - how many month(s) of household expenditure do you put aside for it?

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Oct 5th, 2019 6:31 pm

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Poll: Personal/household Rainy day fund - how many month(s) do you put aside for it?

Total votes: 46. You have voted on this poll.

0: 7; 15%

0-1 month: 1; 2%

1-2 months: 2; 4%

2-3 months: 5; 11%

3-4 months: 4; 9%

4-5 months: 3; 7%

5-6 months: 6; 13%

6-9 months: 4; 9%

9-12 months: 1; 2%

1+ year(s): 13; 28%

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Oct 3rd, 2019 7:36 am

tonershop [OP]: Deal Addict; Nov 9, 2011; 1036 posts; 1125 upvotes; Toronto

Oct 3rd, 2019 7:36 am

Personal/household Rainy day fund - how many month(s) of household expenditure do you put aside for it?

To avoid this thread turning into yet another bragging thread, let's keep the dollar amount out of it. And this thread is also not applicable to those RFD elites who have 1million+ net worth. This thread is for those working & middle-classes households who still need to budget their monthly expenditure. As per the thread title, how much do you put aside for rainy day fund (liquid cash) in terms of the number of month(s)?

So suppose your monthly expenditure is $3,000/month (including rent/mortgage, groceries & bills). If you put aside $6,000 in your rainy-day fund - you got 2 months covered.

I know there are lots of variables when deciding on how much you should put aside for the rainy-day fund such as job security, current & expected financial situation, life-changing events such as new car/house/kid etc. For me personally, I am trying to figure out how much I should put aside for a rainy day before putting the rest into long term investment and/or mortgage lump sum - basically defining a good balance.

Rainy day fund definition: a reserved amount of money to be used in times when regular income is disrupted or decreased in order for daily household operations to continue.

17 replies

Oct 3rd, 2019 9:14 am

muppetslayer: Sr. Member; Oct 27, 2014; 554 posts; 1065 upvotes; Toronto, ON

Oct 3rd, 2019 9:14 am

My cash would cover 2 months of expense. My LOC can cover a year of expense. If the rainy day lasts longer than a year, I would have to liquidate my investments.

Oct 3rd, 2019 9:28 am

tonershop [OP]: Deal Addict; Nov 9, 2011; 1036 posts; 1125 upvotes; Toronto

Oct 3rd, 2019 9:28 am

muppetslayer wrote: ↑ My cash would cover 2 months of expense. My LOC can cover a year of expense. If the rainy day lasts longer than a year, I would have to liquidate my investments.

That sounds like a good strategy. I should look into getting a HELOC. Does it matter if your mortgage is not with one of the big 5 banks? I am with Think Financial.

Oct 3rd, 2019 10:34 am

deltatux: Sr. Member; Feb 28, 2014; 562 posts; 670 upvotes

Oct 3rd, 2019 10:34 am

We have enough to go on for roughly 6 months to cover all expenses in the event both of us lose our jobs. However, the way we view emergency funds isn't just because we lose our jobs but include provisions for other emergencies like doing house repairs should crap randomly break or there's an emergency in the family or what not. For this reason, we don't just keep an emergency fund for only 1 or 2 months as people assume that emergency funds are only for job loss. If there's job loss, we can stretch it further than 6 months as we would start rolling back the non-essentials. We also have a LoC but by the time we use it, we'd be pretty screwed by that point.

Oct 3rd, 2019 10:52 am

ilusa: Deal Addict; Nov 11, 2004; 3191 posts; 340 upvotes; Ottawa

Oct 3rd, 2019 10:52 am

I find with the use of a credit card, you can just charge any emergency expense, you then have that 1 month grace period

Hello

Oct 3rd, 2019 11:09 am

tonershop [OP]: Deal Addict; Nov 9, 2011; 1036 posts; 1125 upvotes; Toronto

Oct 3rd, 2019 11:09 am

ilusa wrote: ↑ I find with the use of a credit card, you can just charge any emergency expense, you then have that 1 month grace period

That is risky unless you have a LOC with a decent rate.

Oct 3rd, 2019 11:32 am

speedyforme: Deal Guru; Dec 11, 2008; 10095 posts; 1522 upvotes

Oct 3rd, 2019 11:32 am

Considering our monthly expenses are 50% of our net income, any emergency can be charged on our credits cards and usually paid off quickly. Otherwise we can cash from TFSA.

+1

Oct 3rd, 2019 11:41 am

tebore: Deal Guru; Feb 9, 2006; 12252 posts; 6803 upvotes; Brampton

Oct 3rd, 2019 11:41 am

Fully invested
0.

If I need to I'll draw the LOC to weather a drop in the market. Use Divs to pay the interest.

+2

Oct 4th, 2019 7:49 am

tonershop [OP]: Deal Addict; Nov 9, 2011; 1036 posts; 1125 upvotes; Toronto

Oct 4th, 2019 7:49 am

It's interesting to see lots of RFDers having over a year of rainy day fund. Why would you keep that much liquid cash outside of investment? Where do you put these funds? Saving account? Short term investment?

Oct 4th, 2019 10:36 am

callernamet: Deal Addict; Mar 10, 2018; 3721 posts; 793 upvotes; centre of universe

Oct 4th, 2019 10:36 am

I would say six months. Isn't that the rule?

I dont care about Ethics, morals, rules or laws. I will apologies only when I get caught.
I try not to apologies but sometimes do it. not because its right thing but it benefits me.
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Oct 4th, 2019 11:22 am

bomber17: Deal Fanatic; Apr 5, 2016; 5281 posts; 3762 upvotes; Calgary/Vancouver

Oct 4th, 2019 11:22 am

I have everything fully invested and HELOC on the side for emergencies. Worse case, I can always pull funds from less risky investments like my dividend stocks.

Oct 4th, 2019 11:31 am

FoFai2015: Deal Addict; Jan 2, 2015; 1602 posts; 603 upvotes; Toronto, ON

Oct 4th, 2019 11:31 am

About six months (now that my job has become stable). It was twelve months beforehand.

The various advice websites say 3-12 months, so usually I break it down like this:

*Single, unstable: 12 months
*Single, stable: 6 months
*Married, unstable: 6 months
*Married, stable: 3 months

Of course, there is no "right" answer. Six months could be too short or too long (money that could have been invested), but it seems reasonably safe.

Oct 4th, 2019 11:24 pm

GoodFellaz: Penalty Box; Jun 24, 2015; 4820 posts; 1441 upvotes; 0 downvotes

Oct 4th, 2019 11:24 pm

you should have enough for 1 year of expenses put aside, so a good 30 grand should cover that.

Oct 5th, 2019 2:30 am

TheDogAteMyName: Sr. Member; Jun 29, 2012; 662 posts; 171 upvotes; Vancouver

Oct 5th, 2019 2:30 am

What?

Oct 5th, 2019 3:49 am

tmkf_patryk: Deal Addict; Dec 27, 2007; 3512 posts; 1061 upvotes; Edmonton

Oct 5th, 2019 3:49 am

0-1 month.

Why? If I need money I go work? It's quite simple to understand

warming up the earth 1 gas fill-up at a time...
You only live once, get a v8

Oct 5th, 2019 11:17 am

rob444: Deal Addict; Jan 2, 2012; 4020 posts; 1916 upvotes; Toronto

Oct 5th, 2019 11:17 am

If by "liquid" you mean cash in a chequing/savings account accessible within 1 day, then 0-1 months. Basically just the in and out monthly banking from chequing account.

Anything in excess of this gets invested, which can also be used as a rainy day fund. My ETFs in TFSA account can be sold, settled and deposited to my chequing account within 1 week. If some emergency desperately needs funds earlier than that can use HELOC while waiting for funds to transfer.

My opinion is that leaving months worth of cash in a bank account essentially losing you money every year, for something that will most likely never happen, is a waste and not good financial strategy. There are better options to prepare for emergencies.

Oct 5th, 2019 5:24 pm

elpaso: Deal Addict; Aug 15, 2009; 1471 posts; 1147 upvotes; Montreal

Oct 5th, 2019 5:24 pm

callernamet wrote: ↑ I would say six months. Isn't that the rule?

No right answer.

Oct 5th, 2019 6:31 pm

Macx2mommy: Deal Addict; Jan 2, 2015; 2051 posts; 1461 upvotes; NOT centre of Univer…

Oct 5th, 2019 6:31 pm

tonershop wrote: ↑ It's interesting to see lots of RFDers having over a year of rainy day fund. Why would you keep that much liquid cash outside of investment? Where do you put these funds? Saving account? Short term investment?

We had a very high liquid amount for a few reasons. My spouse is a consultant, so it's feast or famine. We are in the constant habit of saving a large amount because there could be months without a contract. We also have high expenses with two kids. We tend to keep larger amounts in cash, and if a good investment opportunity comes in, we will dip down to less than 12 months, some times only 3-6 months. Our funds are a combination of rainy day/income levelling/and opportunity account.

It's usually in cash, only because I am a little lazy and am better on the automatic savings part.

On a 'smart' device that isn't always so smart. So please forgive the autocorrects and typos. If it bothers you, then don't read my posts, but don't waste my time correcting me. If you can get past the typos, then my posts generally have some value.

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