Post # 1
I’ve been reading blogs and it seems like quite a few people don’t see the need to have much money just sitting in an account making little interest and prefer to have a LOC to cover a major emergency. Investments can then be pulled out to pay it off depending on the market at the time.
I don’t think there’s a right answer, it just depends on people’s comfort level.
What do you do?
Post # 3
Right now for Darling Husband and I it’s cash. I think we’ll go for more of a combination once we have a house. As it is, we like to keep a decent amount for our chequing. It needs $5000 to avoid fees, and we stay well above that to accidently going below if we both do transactions before checking in with the other.
I don’t think we need additional money sitting in cash with a LOC.
Post # 4
I’ve got a little saved for small emergencies in the $500-1000 range, but if I had something major, like a sudden evacuation from our honeymoon destination or something, I would put it on a credit card until we could get reimbursed by our travel insurance. We have insurance for any of the big emergencies I can think of, so that works for us. We also have tenure at work though. If we could lose our jobs, I’d want more cash available.
Post # 5
For most things we would use cash, but we do have credit cards in case of an emergency where we couldn’t get to the bank or whatever.
Post # 6
A mix of cash and investments. We save a certain amount a month for last ditch emergency savings not to be touched that will just end up being part of retirement savings if we don’t use it. And then another set amount for general savings, that we feel ok dipping into, but try to avoid. Then we have investements we could cash out if things got really dire that we contribute to each month also. We solely use credit cards for points, and pay it off every month though, but I don’t really count it as a line of credit since we use it as if it were cash. We’ve never had to use the credit card for anything knowing that we can’t pay it off when the bill comes.
Post # 7
@AB Bride: We have a combo of cash in checking and Roth IRA contributions to make up our emergency and secondary emergency funds.
Roth IRA contributions can be taken out any time, penalty free – you just can’t touch the earnings on it (without a fee). However, that is only for dire dire emergencies, like we BOTH lost our jobs and ran out of cash and already sold most things. Dire. Otherwise the cash can get us 3+ months of living expenses.
I really think it depends on the person if using a LOC is a good idea or not. There are some that are very diligent and would pay it off with the right investments because they have those investments already, and others that would rack it up or already have debt and just get into a big hole. I think it could be tricky though.
Post # 8
@sienna76: I agree with that, but if the LOC is only for an actual emergency hopefully it won’t even have to be touched!