How many times have you needed money immediately in your life, and how much money have you needed for those incidents? Personally, I do not recall ever spending more than a hundred dollars without at least a day’s warning. Then again, I don’t own a car, which is a big cause for emergency spending—but really that ought to have it’s own fund treated as self-insurance.
How many times have you needed money immediately in your life, and how much money have you needed for those incidents?
Well, if you want to approach this properly… :-)
...then you’ll need to evaluate the probability density of situations in your life where not having a certain amount of cash on hand will lead to severely negative outcomes (aka high costs). I expect that you’ll have much difficulty in trying to form a reasonable estimate (see Nassim Taleb and the general Black Swan concept). Notably, limited amount of historical data (as in, e.g. your personal experience) is not all that good a basis for estimations.
There is also a whole bunch of other factors in play—do you have kids? do you travel much? outside of the US? etc. etc.
How many times have you needed money immediately in your life, and how much money have you needed for those incidents? Personally, I do not recall ever spending more than a hundred dollars without at least a day’s warning. Then again, I don’t own a car, which is a big cause for emergency spending—but really that ought to have it’s own fund treated as self-insurance.
Well, if you want to approach this properly… :-)
...then you’ll need to evaluate the probability density of situations in your life where not having a certain amount of cash on hand will lead to severely negative outcomes (aka high costs). I expect that you’ll have much difficulty in trying to form a reasonable estimate (see Nassim Taleb and the general Black Swan concept). Notably, limited amount of historical data (as in, e.g. your personal experience) is not all that good a basis for estimations.
There is also a whole bunch of other factors in play—do you have kids? do you travel much? outside of the US? etc. etc.