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Sun, 04/27/2008 - 22:43
Alot of financial experts and advisers advocate that everyone should have at least 3 to 6 months of liquid cash in the bank in case of some unexpected mishaps.
However, my question is, after saving and accumulated this 6 month's worth of income, does that mean that one can stop saving and instead, channel all future intended savings into investments and top up only when there is a new change in life( e.g. a newborn, change of career with different payscale, etc).
Thanks and regards.
I think what it means is, if a person want to invest, he should put at least 6 months of expense (or to be safer, 6 mth of income) aside first, at least into an instrument which is highly liquidable.
This is so that if he loses his job, he still have a 6 months buffer before he need to liquidate his investments.
so it means that despite having the sum of money, one should still continue to save a small amount every month and allocate more into investments?
i think its up to personal preference how much you want to put into savings and investments and in what proportion. Their recommendation is just guard the scenario if a person lose his income, he still can survive without liquidating his investments.
Another thought is that perhaps when there is a need for a big amount of cash, an amount is ready anytime lor.
Different strokes for different people.
It can also be 6 months of expenses instead of income.
A lot will depend on how liquid your other assets are. If they are fairly liquid, I suppose you can afford to channel most of your income to investments.
There might also be some long term savings for a near future expense (eg. holiday, uni fees). If the time frame is short, you can't really invest these.
Another factor would be your expenses - how much is fixed and how much is variable. If you have a high fixed component, it means you can't really lower your expenses in times of emergencies.
Come visit the Den of the Lion Investor.
Its generally encouraged to have 6 months of your monthly expenses amount as a backup as if your main bulk of your income stops, you still have 6 months to get another alternative source of income. Take note i mention bulk of income as some people might not be getting their income from working.
Ultimately its up to individual comfortable level, to some it might be 6 months of income or even 1 year of income.
Its up to one's preference.
Cheers Man.
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so it also means that once someone's desired sum of emergency cash is achieved, he can allocate 100% of his upcoming month's intended savings amount into investment?
For example, an investor currently saves $500 per month. But once his desired sum of emergency cash is achieved, he can choose not to save this $500 and put this $500 into investments?
Thanks.
Hi Qwerty123
If you want to put it that way, yes you can do so. However one's desired amount for emergency might change in view of circumstances, regular setting aside of money is a good and advisable habit.
Investment from a certain perspective is also considered a setting aside money or saving, therefore you are still setting aside a certain amount of money for emergency purposes.
Why the term of emergency fund is to allow one to obtain physical cash in the fastest and quickest means with the least hassle which means cash is generally the fastest way. Cash might not be in SGD$, or US$ (As seen in the current US credit crunch). If you are holding RMB, its also considered generally a good hold for the moment... "FOR THE MOMENT".
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
an uncle i know keeps SGD60,000 cold hard cash in a safe at home
cannot touch no matter what
he says that is for emergency.... just in case.......
if anything happen, just pack the bags, take all the money and "run" with wife and 3 kids
(i bet he has more in the banks...)
cannot touch no matter what
he says that is for emergency.... just in case.......
if anything happen, just pack the bags, take all the money and "run" with wife and 3 kids
(i bet he has more in the banks...)
Well in the long term, his 60K is not going to be worth 60K due to inflation. The safe is secure but it does not give interest to offset or minimise the inflation effect. Then hor, if fire how? explosion? he can run but hor suay suay the safe cannot tahan and open up? there goes his 60K as fuel for the fire.
---------------------------------------------------------------------------------------- Contest theory: More entries = More chances - Concept of Probability. Time & Tide waits for no Man.
wah liew, u think too much lah
(and i think safe got fire-proof type)
tt money is cash.
for use during emergency times or when there is no access to his $$ elsewhere.
i guess when he and the family manage to settle down somewhere then can start activating the $$ in the banks or in other assets.
this led me to think tt it's probably good to stash away some cash at home instead of all put in the banks...
(and i dun mean the money in the wallet)
(and i think safe got fire-proof type)
tt money is cash.
for use during emergency times or when there is no access to his $$ elsewhere.
i guess when he and the family manage to settle down somewhere then can start activating the $$ in the banks or in other assets.
this led me to think tt it's probably good to stash away some cash at home instead of all put in the banks...
(and i dun mean the money in the wallet)
HEEHEE actually hor i also got piggies banks at home too...dun know why...as backup? Hahaha always just in case...
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
i don't keep my money at home....only got a tin can of coins...haha
i dun even haf piggy banks...
the cash i have are loose foreign currencies... leftovers from my holidays...
the cash i have are loose foreign currencies... leftovers from my holidays...
my dad also has plenty....all stashed in his drawer...but all coins...
Those foreign currencies can be considered as investment...coz if in the future you are going back to the same place...you can always reuse them...one example...coins for malaysia toilets...very very important...*first hand experience*
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
Those foreign currencies can be considered as investment...coz if in the future you are going back to the same place...you can always reuse them...one example...coins for malaysia toilets...very very important...*first hand experience*
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
can give them singapore coins and ask them to convert to malaysian ringgit? haha
worth more mah
U think they change for u meh...got few possibility..scold u, take the singapore coins or ask u take back singapore coins and give malaysian coins...
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
U think they change for u meh...got few possibility..scold u, take the singapore coins or ask u take back singapore coins and give malaysian coins...
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
i take back my singapore coins and give them nothing in return..ahahaha
One incident recently, when I went KL for the weekend and used some Ringgit notes only to be told by the 7-11 lady that my notes are no longer in production and should be considered as rare.
LOL...coz thats my leftover from my Malaysia trip many years back.
since it's rare, then is the currency worth more?
as in a dollar in ringgit can be used to purchase an item worth 2 ringgit dollars?
haha
Nay..ta gu gu :P boy i miss my smileys
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.