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How big of a cash reserve do you recommend?
by akhilcacharya 7y ago
How big of a cash reserve do you recommend?
- Jtsummers 7y agoThe cash reserve should depend on your particular situation. True cash (e-fund) should probably be 3-6 months of your expenses (that is, you should be able to live on it, not party on it, but live on it). More if you're in an expensive area with a home you can't easily get rid of, or think you'll have difficulty getting a new job or income source. I have a very stable job, I have about 3 months reserve. I want more, but that's what I feel I need. It's more to cover things like emergency expenses for medical or other causes than job loss. Other money is invested and that's what I would touch if I ever needed to, but hope not to. I have a friend who spent years in the video game industry, he has generally kept close to a year in reserve. He got laid off a lot over the years as game projects wound down and they didn't need the staff. That gave him the ability to continue living without any real fear or discomfort. If you're particularly risk averse but in a stable spot, you may want to push towards that higher number too.
- JohnFen 7y agoI don't recommend any amount -- how much is "right" is too individual. Personally, I have two years pay in reserve. It's earmarked for funding a startup I'm planning, but could quickly and easily become emergency funds.