What is a good amount of emergency cash to hold? You certainly can save too little which is most likely the case. But you can also save too much. The amount to hold should be represented in number of months of your burn rate. Watch to find out the details.
How much emergency cash should you hold in your savings account how’s it going everybody this is beat the bush everybody knows that you should hold some amount of emergency savings but exactly how much should you hold is what i’m gonna talk about today so sometimes you might hear numbers tossed around like three months six months nine months or one year worth of
Emergency savings but what does this actually mean so let’s say you want to save one year worth of emergency savings do you put one year worth of salary now not many people can actually do this in an online savings account now for some people that lives paycheck to paycheck that might be the case because if you use your whole paycheck that is your burn rate if
Your burner is exactly equal to your salary that means you have zero savings coming in that means you’ll never reach one year worth of savings because you’re not saving anything as a side note wherever you put your emergency savings you should put it in somewhere that yields a high amount such as an online savings account usually those savings account gives you
Something like 1.8 percent right now it’s august 2018 and i do realize that going forward the interest rate will slowly come up so one of the online savings account i put a lot of money into is markus bank from goldman sachs because they yield about 1.8 percent apy right now they are not a sponsor first let me cover burn rate this is basically everything that you
Need money for throughout the whole year this includes things like rent mortgage hoa utilities health insurance such as cobra if you happen to lose a job car payments student loans food that you need to buy car repair fees home repair fees etc sometimes you have to factor in the fact that if you get laid off or anything your health insurance bill might go up so you
Need to factor that in to see how much burn rate you actually will have if you happen to lose a job now what is the right amount to hold in your emergency savings the right amount is the amount that you’re comfortable with after you figure out your burn rate then you go okay do i want three months six months nine months twelve months two years or three years worth
Of emergency savings given your burn rate and all the facts you probably have a number if it sits there in your savings account in cash then this money should gives you a warm fuzzy feeling knowing that that amount is in your savings account you can sleep very well at night knowing that money is there when emergency comes ups really reduces your stress level and
Allows you to sleep better and i know i personally sleep a lot better and i feel a lot more relaxed of course when you have this amount in the savings account imagine a situation like this let’s say you have one year worth of burn rate and then you suddenly get laid off you have a hard time finding a job you burn through six months worth of your emergency savings
Taking into account all the unemployment benefits you then see you have six months left and then five months left for three with that not really really stress you out so having more in your emergency savings is definitely better but you can go overboard why because if you hold too much cash is essentially depreciating and you want to actually take any extra money
Over your emergency savings comfort level and make it work for you in an investment i personally have a comfort level of around 1.5 years to two years worth of emergency savings that is the sweet spot i kind of like get a little iffy if it drops anywhere below that a lot of people in the comment section they say yeah you know two years it’s a good amount that’s the
Amount where you feel really good that is what you’re striving for is like this comfort feeling that you’re actually buying yes you can take all of it and stick it in the stock market snp or something but this is gonna cause you daily stress every single day that the stock market goes up or down you’re gonna be worried a little bit and you know this small amount
Of constant stress is actually not good for your health so thanks for watching everybody if you’re interested in supporting my channel check out my audible link down in the video description below where you can get a free audiobook hey if you don’t like this audiobook or this subscription you can cancel it before the subscription expires and can still keep a free
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Transcribed from video
How Much Emergency Savings to Keep By BeatTheBush