I don't have an emergency fund and have never had one. I just could never afford to start and maintain one. Too busy trying to pay the bills, have a life and help raise kids.
I never really understood where most people could find that kind of extra cash to put away for an emergency.
I have used money put away for life insurance, RESPs and home ownership funds. Ontario used to have a program back in the 70's called the RHOSP - registered home ownership savings plan. I tapped that account when I heard they were going to unwind it. I only had a few bucks in there anyway. It was never used for it's intended function.
Point is, I could never ever not touch those supposed savings accounts. I just didn't have the discipline. Something other than an emergency always came up so poof, there goes that money.
The next thing you know, guilt sets in and you give up. At least this is what happened in our case.
Buying a house pretty much puts the damper on that strategy. If you don't believe me try and convince your spouse that you need to also do this. There just was never enough money left.
You might have heard about this strategy a lot from a late night bleach blonde personal finance guru from the U.S.A. She constantly pounds the table on this. I haven't watched in years but I'm sure she still does.
I have also found out that the emergency never really shows up. It just doesn't. Buying winter tires for your car is NOT an emergency.
What else to do?
Home Equity Line of Credit
This is what I use when I need money fast for whatever comes up. I prefer this to emergency savings accounts because;
- costs zero dollars to set up
- interest rates on borrowed money is so cheap
- I would rather invest my money in stocks than save it
- HISAs - high interest savings accounts pay a shitty rate
The other beautiful thing about these gifts for owning your own house is you can use the money to pay off other spending mistakes you have already made.
Higher interest payments on credit cards or god forbid, department store cards. My HELOC rate is slightly over 4% on a secured account.
INVEST your money don't SAVE. It just doesn't work, like budgets and diets don't work.
THEY ALL JUST DON'T. If they did there would only be one choice. The reality is there isn't.
Get your money working for you in an investment account as soon as you can afford it and never worry about an emergency that will never happen. Let us pray!
I never bother with an emergency savings account. Go apply for a secured HELOC on your house. Much better option. My opinion and just what I do.
What are your thoughts on saving for an emergency? Do you have a HELOC?
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