I keep 8 months of core expenses (rent, utilities, groceries, minimum debt...

I keep 8 months of core expenses (rent, utilities, groceries, minimum debt payments) in a high-yield savings account. I used to keep it in a regular savings account earning practically nothing, but switching to a HYSA got me around 4% interest last year. That added a few hundred bucks to my fund without me doing anything.

One thing nobody mentions is keeping part of it in a slightly less liquid form. I put 2 months worth into a no-penalty CD. It earns a bit more interest than the HYSA, and I can still break it anytime without a fee. That way I'm not tempted to dip into it for non-emergencies because it takes a couple days to transfer out. The rest stays in the HYSA for immediate access.

I also keep a separate small cash buffer at home, maybe $500. Not for major emergencies, but for things like a power outage or when the card machines go down during a storm. Learned that one from a neighbor who got stuck without cash during a blackout.

The bigger question is what counts as an emergency. I learned the hard way that car repairs and medical copays aren't really emergencies if you budget for them separately. I now have sinking funds for those things, so my emergency fund is strictly for losing income or a true disaster. That saves me from draining it every time my transmission acts up.

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Chavez Alejandra @alejandrachavez6151

Wait the sinking funds thing just clicked for me. I've been using my emergency fund for car repairs for years and wondering why it never grows lol. Gonna start separating those out. Also the cash stash idea is smart af - I was caught in that Texas freeze a couple years back and couldn't buy groceries for like 3 days cause nothing worked. Definitely stealing that trick.
10 days ago

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