In short
Emergency funds and how to budget for them, including why they matter more than investing returns in the short term, where to keep them, and how much to target (6–12 months). It also covers automation for rebuilding after withdrawals and avoiding credit-card “emergency funds.”
Guests
Andrew Sather (returns as co-host/interviewer; discusses budgeting and emergency-fund strategy) and Evan Ray (hosts “At Any Rate,” interviewed by Andrew; shares his own emergency-fund setup and approach).
Key claims
60% of Americans can’t afford a $1,000 emergency (Bankrate). Credit card debt interest can derail years of progress. Cash and standard savings accounts underperform after inflation; high-yield savings accounts are the preferred default.
Notable examples
Andrew cites medical expenses he had to cover unexpectedly; Evan describes keeping his emergency fund around 8 months and aiming for 10–12 months, funded via employer direct-deposit automation. HSA is suggested for medical emergencies (requires a high-deductible health plan).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOThe Misconception of Starting a Business
0:00 to 0:56
Learn about the common misconception that starting a business requires a revolutionary product.
“There's a huge misconception that to start a business, you need to invent some revolutionary product.”
Budgeting as an Essential Tool
2:18 to 2:56
Understand the importance of budgeting in personal finance and its often overlooked role.
“This time around, we're going to be having Andrew interview me.”
The Case for Emergency Funds
2:56 to 4:28
Learn why emergency funds are crucial and the psychological barriers to prioritizing them.
“It's not the part that's directly going out and making you money and directly increasing your bank account or directly increasing your investments or anything.”
Impact of Financial Emergencies
4:28 to 6:32
Explore the consequences of not having an emergency fund and the cycle of debt it can create.
“You know, you go take a multivitamin right now.”
The Importance of Maintaining Financial Progress
6:32 to 7:52
Discover how unexpected expenses can undermine your financial stability and progress.
“And for me, getting caught in that debt for a situation like this, it starts off that self-feeding cycle.”
Where to Keep Your Emergency Fund
7:52 to 13:00
Learn about effective places to maintain your emergency fund and the benefits of high-yield savings accounts.
“if you're a beginner and that doesn't sound that big of a deal, and it's like, oh, well, I can just kind of come back from that.”
Understanding HSAs and Medical Expenses
15:52 to 16:49
Explore the importance of HSAs and their benefits for medical expenses.
“Even like some of the best insurance plans might have thousand dollars deductible or something like that.”
Navigating Savings Accounts and Interest Rates
16:49 to 18:59
Discover how to choose high-yield savings accounts and understand interest rates.
“You know, if you're somebody like the great Andrew Sather or Dave Ahern and you want to dive into it more, then you're welcome to dive into it.”
Emergency Funds: How Much to Save?
18:59 to 21:32
Learn the recommended amounts for emergency funds and why they matter.
“Now Andrew, I know HSAs are something you've worked with as well yourself.”
Calculating Your Emergency Fund Needs
21:32 to 24:18
Calculate how much you need for an emergency fund based on expenses.
“So we've talked about why emergency funds are important.”
Show all 14 chapters
Prioritizing Savings During Emergencies
24:18 to 26:50
Understand how to manage savings and investments during financial crises.
“If you're making a lot more and spending a lot more, then it'll account for that and vice versa.”
Understanding Emergency Funds
28:06 to 36:59
Explore the importance of having an emergency fund and how to manage it effectively.
“The more I've gotten to learn about Bitcoin and start to dip my toes with it, the more I realized some of my preconceived notions were incorrect.”
Automation in Financial Management
36:59 to 39:26
Discover how automation can streamline your savings and improve financial resilience.
“So on that side of things, on budgeting side of things, I would go to my budgeting table.”
Listener Engagement and Wrap Up
39:26 to 39:59
The hosts invite listeners to share their experiences with emergency funds.
Transcript
Automatic transcript. May contain errors.0:00Evan Raidt:There's a huge misconception that to start a business, you need to invent some revolutionary product. But the truth is, you really don't. Some of the best businesses start as a simple side hustle, like selling a craft you make on the weekends or turning a hobby into extra cash. For a lot of people, the real hurdle isn't the idea. It's the technology. Figuring out how to actually sell online is where a lot of folks just give up. That's exactly why you need Shopify. Shopify is the e-commerce platform responsible for millions of sales worldwide. It handles all facets of your business, your online storefront, your inventory management, and your point of sale.
0:36Evan Raidt:So you don't have to juggle 10 different systems. One platform is all you need. You also don't need to be a tech expert. Shopify templates and AI tools get you a stunning site up and running fast. No coding needed. And because Shopify handles the setup and checkout, you have more time to focus on actually growing your business. If you're ready to hear the of your first sale today, head over to Shopify.com slash beginners to start your free trial. That's right. Start your free trial at Shopify.com slash beginners. That's Shopify.com slash beginners. Support comes from Wise, the smart way to manage the currencies you need around the globe.
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1:58Andrew Sather:Good to see you, everyone. Welcome back to At Any Rate. My name is Evan Ray, and we're here to help you make sustainable financial changes without breaking a sweat with this weekly series covering personal finance topics. And we have the end goal here of helping people improve and better their understanding of their finances with as little effort as possible. And today we've again got Andrew Sather back with us. However, we're going to be doing this episode a little bit different than usual. This time around, we're going to be having Andrew interview me. Does that sound all right, Andrew?
2:24Evan Raidt:Yeah, that is great. We are going to talk about something fun. It's an essential tool to finances, maybe not covered a lot. It doesn't really come intuitive unless you've researched personal finance, but obviously super, super important. So what are we talking about? What is this essential tool?
2:44Andrew Sather:Yeah, we're going to be discussing budgeting. And I feel like this is something that's often and missed in the investo sphere and in the finance sphere because of it just not being, it's not very flashy. It's not exciting. It's not the part that's directly going out and making you money and directly increasing your bank account or directly increasing your investments or anything. And so it's pretty easy to miss and forget about and isn't discussed as often as it should be. But for me, it's just the very first step in the whole process if you want to be safe and sustainable about things.
3:19Evan Raidt:Do you think there's a reason why emergency funds and, you know, that being kind of the crucial first step of a budget, why that's not talked about much?
3:31Andrew Sather:Yeah, I just feel like it, it's you putting in effort without some immediate return. If you go out and invest, you can be certain that your investment is going to change in value, may not go up, but it may at least change. And so you're going to see that effect pretty quickly. You know, you go invest in Apple right now and within the next two minutes, you're going to see the value of the investment change. You know, however often your brokerage updates the values. But if you go out and set up a budget and you understand where all your income is going, you understand all your wants and needs and different savings investments and everything, you're not going to see anything change that minute.
4:05Andrew Sather:I mean, you may not even see things change that month or those couple months. You're going to start seeing things change over the, I'd say, medium term, like five months or something, half a year, a year, a few years. Over that time frame is when you're going to start seeing things really move and shift in an obvious way. But if you don't have that immediate feedback that people want, it feels like it's completely unnecessary to do. It's like eating healthy. You know, you go take a multivitamin right now. I just took one this morning. I do not feel infinitely better than I did before just because I took one.
4:36Andrew Sather:but I do know that 10 years from now it's it's gonna have an effect yeah uh that completely
4:42Evan Raidt:makes sense all right break down the emergency fund what is the big benefit if you're making the sales pitch to me I would definitely want to know like why is it important so in this case of emergency funds if it's not giving me an immediate return why does it matter why is it important
5:01Andrew Sather:Yeah, there's a statistic that comes to mind for me, which is something I think of pretty often around this topic, which is around 60 % of Americans can't afford a$1 ,000 emergency right now. And that's according to bankrate.com. And for me, that's a massive shift because we can all think of many, many, many ways that you can have a$1 ,000 emergency. Something like health issues can come up, car trouble, anything, pet or children, if they have any health issues or expenses that come up, any lapse in income. If you stop making money for a month, you're definitely going to be losing$1 ,000 one way or another.
5:39Andrew Sather:And the fact that more than half of America can't afford one of those things to come up is very disappointing and frustrating and shocking. And something like an emergency fund is intended to be there for those$1 ,000 emergencies or even more than that. And the only other alternative to not being able to quote unquote afford these things is that you go into debt. That's how people pay for these emergencies is they have car troubles. They have to get a couple new tires because one went flat, but the tread isn't matched, blah, blah, blah. And they're having to drop a thousand dollars on tires or wheels or something.
6:13Andrew Sather:They're putting that on a credit card. Now they're in debt for those tires or wheels until they're able to pay it off in a few months. Now they've paid interest on that. And suddenly their$1 ,000 emergency turned into like a, we'll say$1 ,200 emergency or something when it didn't need to. And if they couldn't afford that$1 ,000 up front, they definitely can't afford this additional$200 that's stacking onto it. It's just a self-feeding cycle. And for me, getting caught in that debt for a situation like this, it starts off that self-feeding cycle. It just keeps feeding back into itself and getting worse and worse.
6:46Andrew Sather:And so you don't want to kind of get your foot caught on that first step that is falling into debt for something like this. I recently had to personally cover some medical expenses, nothing too major, but I did have to cover some stuff that I wasn't expecting to cover. And if I didn't have an emergency fund at the time, the only other option I would have had to pay for it is to pull out of some of my savings. Now, this would have been a high-old savings account, so it would have been money that's pretty accessible. As the listeners know, I definitely love high-old savings accounts. However, for me to pull out of a section of my high-level savings account I wasn't expecting to is just going to decrease the amount of returns I can get.
7:22Andrew Sather:And so even if I'm not directly paying interest on these expenses, it would have led me to decrease the amount of earnings I'm going to get on those savings and so kind of lose money that way, if you can think about it that way. So having an emergency fund ready to cover any sudden payments you need to make that can come up for a myriad of reasons is essential to make sure that you stay on track for your financial goals. That's really where this all leads to in the end. Yeah, and if I can just add on top of that, if you're a beginner and that doesn't sound that big of a deal,
7:58Evan Raidt:and it's like, oh, well, I can just kind of come back from that. Interest rates on credit cards are ridiculous. And so putting stuff on a credit card, like that sounds pretty casual and lightweight, like a credit card, whatever. like we all have them but the difference in interest rate i mean credit cards the worst you know i mean there's a lot of bad debt but like the impact of credit card debt and trying to climb out of credit card debt because of the way the math works is so much worse than it's just it's unless you've gotten stuck in it before where you're in the minimum payment cycle and I've been there.
8:40Evan Raidt:Or if you've just kind of done the math and you understand how compounding works, it's really hard to dig out of the credit card debt. And to your point, it can completely derail everything you've worked. It could take away years of good saving, good budgeting, good personal finance moves. And so it's a very, very, very dangerous trap if you have to rely on credit cards. Yeah.
9:06Andrew Sather:Yeah, I don't want to say I like the way you phrased it because it's a sad way to think about it. However, I like the way that you phrase that it's removing all that progress because you can go out and make a budget. You could be investing. You could have a retirement account set up that you're contributing to. You could have a high-yield savings account. You could do all the right things to be growing your wealth. And especially if you're a pretty young like me and so those savings in different places haven't had time to compound so your returns aren't massive or anything like that. taking on credit card debt for an emergency just for one month, one time, that interest that you pay could, like you said, easily wipe out a good amount of time of progress.
9:43Andrew Sather:And that's a worst case scenario for many people.
9:47Evan Raidt:Yeah, totally. So hopefully people are bought into this idea of having an emergency fund. What are some of the places where you would keep it? Like, where would you even start when it comes to having the emergency fund?
10:03Andrew Sather:Yeah, the first thing I'll say is like we're just talking about the last place I would tell you to keep it would be a credit card and For people, you know in the finance space It might sound silly to even consider having an emergency fund quote-unquote in a credit card because that's not really how credit cards work But I do know personally and online and everything Many people that have told me that their emergency fund is their credit card That's why they have a credit card They don't want to use it because they don't want to be going into debt otherwise. They don't think the points are worth it, the benefits, all that sort of stuff.
10:32Andrew Sather:So they don't use their credit cards, but they're just sitting there as an emergency fund. And from my point of view, that is the worst way to go about it. Like for all the reasons we just talked about, that is putting you into debt for something that doesn't need to put you into debt. You know, we're not talking about having an emergency fund of$80 ,000. You know, we're not talking about some crazy mass emergency fund. We're just talking about something to cover those, those little emergencies that come up over time. Your car breaks down this morning and you can't get to work. You need to pay for the Uber to get to work, pay for the Uber to get back, pay for the tow truck to take it to the mechanic, pay for the mechanic to fix it.
11:08Andrew Sather:Those little things add up, and we want to be able to cover those kinds of situations. So where to keep it? The second worst next to credit cards for me would be cash. I would also recommend keeping it somewhere other than cash because you're going to be getting absolutely zero returns on that, and that's not even including inflation, which all of these, of course, you have to factor in inflation if you want an accurate result. But if you include inflation, cash is just going negative. Similarly, something like a standard savings account, it's also going to be going negative. Even if a savings account gives you 1%, which I don't know of one out there that does, but to give them benefit of doubt, even if it gives you 1%, we're still going negative with the average 2 % or 3 % inflation rate.
11:46Andrew Sather:To me, the best is a high-old savings account. That's where I keep mine. That's where I personally recommend people to keep theirs. You can be expecting around a 4.5 % or so percent return. That's going to vary depending on the current interest rate in the U.S. So it may go as high as maybe five and a half and it may go as low as like three or something. So we'll say in the middle about four and a half percent. That's going to give you good liquidity. It gives you solid returns. It's very accessible, very easy to manage and track and contribute to it. To me, it's just the best all-rounder. Another option I would say that covers part of your emergency fund situation is a health savings account, an HSA.
12:24Andrew Sather:That is a fantastic account to cover medical emergency expenses. So that is something that I use to pay for a significant amount of the medical expenses that I had during that time pretty recently. I used my health savings account, and that's a massive tax advantage account. You're able to contribute pre-tax funds to the account. It's going to grow tax-free, and then you're able to use it tax-free in the end. So in the end, you're just getting much more money to use whenever necessary. And since you can invest it just like you could normal money, it's able to grow at the rate of the stock market essentially.
12:58Andrew Sather:So we'll say 10 or 11%. So as you can see, that's a much higher return rate than any of the other account options. The only issue being that it can only cover medical expenses. But I think that that's a fantastic way to cover that side of your emergency fund.
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15:21Evan Raidt:Let's face it. Modern work life is complicated. But good news, we're here for you. I'm Kayla Lopez. And I'm Kyle Heggie. And together, we've helped thousands of Morning Brew subscribers grow in their careers. And now as the co-host of per my last email, we're bringing that advice straight to you each week with hot takes and tactics on how to succeed in every area of work. Whether that's figuring out if you're being underpaid or how to stand out in a remote work environment.
15:45Andrew Sather:So join us each week on per my last email on Spotify, Apple, YouTube or wherever you get your podcasts.
15:51Evan Raidt:Yeah, medical expenses. Definitely. Even like some of the best insurance plans might have thousand dollars deductible or something like that. having the ability to tap at HSA. And I love HSA, especially if you're younger, you know, the ability to, like you said, be able to invest that and then pull it out. I know, I know you're not supposed to do this. Like I know you're supposed to keep some cash in the HSA, but you know, I'm a stocks guy. I can't help myself, but there is something about being able to sell some stocks at a profit, which depending on the timing of when you do this, right. But you obviously can't control that.
16:29Evan Raidt:And that's why it's not recommended to do it this way. But the ability to pay for medical expenses, selling some stocks at a profit feels really nice. So if you have that option, that is a great, very great option as well.
16:46Andrew Sather:Yeah. And whether that's the way you're quote unquote supposed to go about it or not, it's good because it gives you the flexibility to do stuff like that. You know, if you're somebody like the great Andrew Sather or Dave Ahern and you want to dive into it more, then you're welcome to dive into it. And if you just want to kind of let it ride, then you can let it ride.
17:04Evan Raidt:Side note, by the way, like the fact that a savings account still only pays less than a percent point. And then the banks have pulled the greatest stint on us calling them high yield savings accounts. It's like the savings account itself should have always been high interest. Like that's insane to me because of the way that interest rates have moved now. The best marketing ploy I've ever seen in banking.
17:29Andrew Sather:it's it's really silly and frustrating to look back on it in hindsight especially you know with how banks work they're able to just use that money and invest it how they want do do we really believe that they're only able to generate a one percent return on the money we're giving to our
17:44Evan Raidt:savings accounts i there's no way in hell so you're saying the effort taken to go find a high yield savings account for your emergency fund is worth like that juice is worth the squeeze
17:58Andrew Sather:yeah because because the squeeze is is very very little the squeeze is 10 minutes to look online at what reputable accounts out there have a solid rate you know you look up i personally use sofi i know there are some others out there that i believe have a slightly higher rate stuff like uh capital one is another one it's very reliable there's other ones out there with very reliable banks if it's a name you recognize then it's something you can trust and as long as it's fdic insured so you know that if something happens to that bank your money is going to be okay the squeeze is only going to be 10 minutes to look for the account maybe 10 minutes to sign up for it probably more like five minutes to sign up for it and then another five minutes to set up the contributions there so we're talking about 20 minutes of effort for we'll say we'll be generous to savings account and say 5xing your returns even though it's realistically probably even closer to 50xing your returns from a savings account yeah and we don't
Read the full transcript
18:49Evan Raidt:know where interest rates will go so it could even become higher i know that's that's not a popular take so maybe I'll refrain from talking further about it.
18:59Andrew Sather:Now Andrew, I know HSAs are something you've worked with as well yourself. Who can actually open HSA? Who has access to one? How would they go about opening one and where?
19:11Evan Raidt:The big thing for HSA is you have to be enrolled in a high deductible health plan. I'm not going to go over the numbers because those change, can change, probably will change from year to year to year if you're listening to this in the future. But you can quite easily do the research online to figure out if you actually have a high deductible insurance plan or not. So that's the first thing to keep in mind is if you have great insurance, I'm sorry you can't contribute to your HSA, but hey, you got great insurance, so you're chilling still. There are several options for HSA. A lot of employers do offer that as an option.
19:52Evan Raidt:I have a brokerage account with fidelity and i also have an hsa with fidelity and so what i like about using fidelity for that is i'm able to buy individual stocks in that hsa where if you have a hsa somewhere else maybe that's not an option maybe you can only invest in mutual funds or something like that so what's nice that's flexible about the hsa is you can open it doesn't have to be with your employer if you want it to be that way because it's more convenient for you that's cool as well. But on my dashboard, when I log into Fidelity, it has my list of accounts and the HSA is right there. So it's nice to have it all in one dashboard.
20:29Evan Raidt:It's nice. It's easy to transfer money and things like that. And then obviously being able to buy those individual stocks. So those are the things to kind of keep in mind with HSA. And that's how you would deal with those options.
20:43Andrew Sather:Yeah, that's beautiful. I've personally opened mine through my employer. Like Like you mentioned, it was at the time I didn't even know what it was. So I just opened it and it was contributing a bit to it before I did a ton of research into it. So mine's through my employer. We use Inspira. I think it used to be called Payflex. I can only invest in either mutual funds or there are a couple of funds kind of similar to my 401k options where it tries to track the overall market. It's not the usual index funds out there, but it does its best to track the overall market. And so that's what I usually invest in for many, many reasons to try and generate the highest returns possible.
21:18Andrew Sather:And a massive part of that for me is making sure that it's automated as well. As always, we never want to be expecting to manually contribute to these things. We want this all to be set up, automated in the background. And if you want to hear a little bit more discussion about automation from us, you can just search AAR or at any rate automation on Spotify or whatever podcasting platform you use. And it'll come right up. Perfect.
21:44Evan Raidt:All right. So we've talked about why emergency funds are important. We've talked about how you can open an emergency fund. Let's get into the nitty gritty. Let's talk deets. How much should you put in your emergency fund and why?
22:01Andrew Sather:I will never prescribe a specific number for everybody. I don't like those blanket figures. I know something like 10K tends to float around as a good blanket number for everybody. And even if this does work for most people, I just think that that is putting, I mean, we just talked about the fact that over half of Americans can't even afford a thousand dollar emergency. I think that toting around that you need to have 10K in an emergency fund is just going to turn a lot of people off from worrying about it because they're going to think I can't even afford a thousand bucks right now. How do you expect me to put 10 times that in an account that I can't touch or shouldn't touch for the most part?
22:36Andrew Sather:I think that's unreasonable. So the way that I like to look at it is the first step for me is six months worth of expenses in your emergency fund is the best way to go about it. You can go back and use your budget to determine what your total expenses are and then that'll allow you to calculate what six months worth of those expenses would be. And make sure if you do these calculations to include your dependents expenses. We want to be including any money that is going to be coming out of your account for any needs or wants. I like to include wants in those calculations because I feel that you can get in a little bit of hot water if you say, you know, I have$1 ,000 in needs every single month, but then I also have$400 that I like to go spend on stuff.
23:21Andrew Sather:You know, I like to eat out, I like to buy a couple clothes, decorations for the house or something, and suddenly you have to use this emergency fund, say you've got a lapse of income, and you keep spending on those wants and don't realize that you didn't include those in those calculations and suddenly you're eating away at your emergency fund much faster than you plan to. So for me, it's important to take that budget and include your needs and wants and calculate that out for six months and make that as your good target goal for your emergency fund. I would say that an optional stretch goal for it would be 12 months.
23:52Andrew Sather:Just cover yourself for a year. I actually looked it up and the median length of unemployment in the U.S. is about nine weeks. So saying that you have at least nine weeks in your emergency fund worth of, again, all expenses, needs, and wants, I think is a great figure to aim for. For me, six and 12 months are a little bit easier to remember and keep in mind and a little bit easier to calculate. And they're good blanket figures that will adjust to anybody's financial situation. If you're making a lot more and spending a lot more, then it'll account for that and vice versa.
24:25Evan Raidt:Yeah, those are awesome. I like that. It's easy to remember and that's very important when it comes to personal finance can't make progress if you don't even know what you're shooting for so i'll ask you this like you talked about the different expenses to include do you include your automations your savings automations your investment automations do you include those or no i don't personally include them and that's a great
24:52Andrew Sather:question. I think that that can be on a person-by-person basis. For me, I know that if I was in an emergency where I had a lapse in income that I wasn't expecting, say I got fired from my job today, I got laid off today, and I have to cover a lapse of income I wasn't expecting, I think that if I don't have my income anymore, then I know that my 401k contributions aren't going to be happening anymore because that's happening through my employer. And I would be comfortable with stopping the couple automations that I have out there to my high yield savings account to my HSA also isn't going to be happening anymore because that's through my employer, stopping my Roth IRA contribution, completely stopping all the automation to prioritize getting by at that point.
25:39Because the way I think about it is even if you're sacrificing what you can
25:44Andrew Sather:contribute to those savings and investing accounts, so theoretically you're losing out on some returns you could be generating, that downside is going to be much lower than if I attempt to continue contributing to them and then say I have an emergency happen during my lapse in income or say the lapse in income lasts longer than I expected it to. And because I kept trying to push and kept trying to contribute to those growth areas like savings and investing, it caused me to to have to go into debt to survive this lapse of income than like we talked about before with credit cards that whatever credit card interest rate it is is easily going to outpace whatever returns I'm missing out on so for me the downside is much much lower for just sacrificing a few returns by stopping my investments and savings for the time being and just prioritizing getting by at that point I think your mindset kind of shifts from from growth to more survival just we need to get through this point with as few scars as possible and get to the other side instead of trying to continue growing during a point when it's not really feasible.
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28:06Evan Raidt:The more I've gotten to learn about Bitcoin and start to dip my toes with it, the more I realized some of my preconceived notions were incorrect. For example, I don't have to be all Bitcoin or all stocks. I can learn very instructive lessons about assets, currencies, and investments from the very long-term history of the world, and I don't have to be a speculative trader or radical enthusiast or even somebody who frets about the volatility when I have the right tools to set up a prudent allocation for my finances. That's why I use Cash App and love the recurring feature, which automatically takes a percentage of my paycheck and places it into Bitcoin, which I can spend at any time on the app or continue to let it sit and potentially grow over time.
28:46Evan Raidt:If Bitcoin is part of your long-term strategy, consistency matters. Cash App lets you set up automatic Bitcoin purchases with auto-invest so you can build exposure over time instead of trying to time every move. You can also use roundups or pay them Bitcoin to make Bitcoin part of your normal money flow. Automatic Bitcoin purchases on Cash App have zero fees and zero spread, which matters if you're buying regularly. Download Cash App today. Visit our link in bio. Bitcoin services by Block, Inc. See the Bitcoin disclosures at cash.app.legal.podcast. totally makes sense i'm shocked at the nine weeks thing being the the length the median length of unemployment i for whatever reason i would have thought that would have been much higher so putting yourself at like a six-month target would be great because you could be really bad at interviewing and still technically be okay because you're you've got that buffer of uh letting your unemployment stretch if it needs to.
29:48Yeah.
29:48Andrew Sather:And I'd also add that that nine weeks, and obviously I don't have any data to back this up. So this is just speculation, but I would guess that that those nine weeks, a lot of the people that, that are, that have their unemployment for that short of a period of time are diving into jobs that maybe they didn't ideally want to take because they have to, you know, you're, you're in that lapse of income, You know that you need another job to get by. And you don't have the emergency fund to cover you for the time being. And so you just need to go find something. You just need to go get income as quickly as possible.
30:19Andrew Sather:And we want to put ourselves in a situation where if this lapse of income happens, we can stay calm, know that we can weather the storm for a good while, and go out and find something that is equal or even better than the situation you were in previously. we want to be in that that position of control over the situation and and having the upper hand in the patience we don't want to be you never want to be financially you never want to be in a situation of being desperate because if you're in a situation of being desperate things are never going to turn out as well as they could have otherwise if you were able to be calm and patient and and set yourself up for that ahead of time you know if you were able to prepare your emergency fund a couple years ahead of time take those couple years to build it up and then this lapse of income happened, you're going to be in a much better situation to control the narrative that happens going forward than if you hadn't done that whatsoever.
31:10Andrew Sather:And now you're just at the mercy of who's the first person that likes you're interviewing. Right.
31:15Evan Raidt:The whole abundance versus scarcity mindset, which we're not going to dive into, but you can definitely maintain an abundance mindset becomes a lot easier when you have that cushion to fall back on. so we talked about six months talked about 12 months any other thoughts about this or just anything kind of popped to mind as we talk about the length of savings in the emergency fund
31:42Andrew Sather:the last thing that comes to mind is that i it's a little counterintuitive but i would lean away from going too far over your goal i'm not saying going five dollars over your goal is going to anything but going double your goal when you weren't planning to. If you feel that a 12 month's worth of emergency fund is just too much for you, I'm currently at around eight months or so. I'm aiming for 12 months, so I'm still building it up at this point. If you feel like 12 months is just too much to have put away in one place that isn't going to be growing at the highest rate possible, or if you just think you're never going to be unemployed for that long or not going to have an emergency within reason that's going to come up for that much, then I would say going over your goal, even though it's not bad per se, isn't ideal because you are going to be reducing the potential returns that you're going to have.
32:31Andrew Sather:So I would lean away from just stacking a bunch of money in this emergency fund because I feel like that's only one step better than the old version of squirreling away money where you're just shoving under a mattress. And the issue with that is that you're earning no returns whatsoever. Now, even though you are earning returns, you're not earning nearly as much as you could because you could still be doubling those returns in something like the stock market or real estate or something like that. So you are missing out on a significant amount of money and growth in the long run. And I would lean away from just stacking too much money in there.
33:03Andrew Sather:So I would say hit your goal and then keep it at that point. If you draw from it, that's another whole topic in and of itself is if you draw from your emergency fund, I would recommend immediately starting up an automation to start contributing some money to get there and rebuild it up, let's say ideally within a few months or six months or something like that. We want to build it back up within the short term because anything can happen. Your car could break down this week, and then two months from now you could also have a medical emergency. Sadly, you never know when these things are going to happen ahead of time, and I think that being prepared is always important, even if it just happened.
33:44Andrew Sather:even though it sucks, it should be part of the process to start planning for the next time it could happen. And so build it back up and then once it reaches the goal then you can shut off the faucet again and then let it sit where it was before.
33:57Evan Raidt:I was going to actually ask you about that so I'm glad you brought it up. So if some of these wanting to start building that for the first time, obviously asking the dentist if you need dental work here, you're going to press automation. How does that look like for you? and then once that's done, like what would you do with that automation or I guess the money that's freed up from that?
34:19Andrew Sather:Yeah. So how I have it personally done is my automation is done on my employer side of things. So from my direct deposit side, I have it pointed to a portion of it, a set portion of it each month or each paycheck directly pointed to my, the portion of my savings account that's set up for my emergency fund. And because I recently had those medical expenses, it's not quite up to the goal that I want it to be at. Like I mentioned, it was eight months. I'm aiming for closer to 12 months, 10 or 12 months maybe. So currently it is still being built up and I have that automation set up on the employer side of things.
34:57Andrew Sather:So just pointed directly to a savings account. That's essentially all that's happening there. And then it grows once it gets there. Then once I reached my goal or reach approximately my goal, then I'll go back into the employer side of things, the direct deposit area, and just pause that direct deposit to that savings account or cancel it, however your payroll system works with your employer. I'll just go in and shut off that automation for now. Then let's say in two months I had an issue with my car that I need to get resolved and I need to pull away half of my emergency fund or something to pay for it.
35:30Andrew Sather:I will then go back into the direct deposit side of things after I've done paying for the issue and just turn that automation back on. I'm not going to worry about yanking money from other places to try and fill the emergency fund quickly because again wherever I'm going to pull it from is almost certainly going to be earning higher returns than the emergency fund is going to so I would rather keep that money in the growth area knowing that I just paid for an emergency and even though nothing is ever certain it's unlikely I'm going to have to withdraw from it again immediately you never know for certain but just playing the numbers I'm likely not going to have to pull from it again immediately so I would just let that automation build it back up and ideally like I said I'd have that that automation fill it back up within three to six months a relatively short period so I might adjust that automation depending on how much I had to pull if I had to pull away my whole emergency fund or something then I might turn that turn up that automation significantly it might have to also go in and adjust other automations like my Roth IRA or 401k or something to have that money fill up my emergency fund as quickly as possible.
36:36Andrew Sather:Because again, for me, the downside of missing out on 401k returns for a couple contributions is much lower than the downside of saying, you know, I should probably let that 401k continue growing. And then, oh, well, now I actually have to use a credit card to pay for this and I can't pay off the credit card right away. So I'm going to have to carry interest on it. And that's going to, that downside is going to stack up far, far more than missing out on some 401k returns. So this is also where having a budget where you can visualize everything is incredibly essential and very useful. So on that side of things, on budgeting side of things, I would go to my budgeting table.
37:10Andrew Sather:I would look at my savings and investing because I'm probably not going to mess with my wants or needs for a situation like this. Go to my savings and investing, turn down the Roth IRA and 401k as needed to get the emergency fund contributions up where I need it to. And then once it's filled back up, go back in and blank out that emergency fund row and then go in and turn up the 401k and Roth IRA back to where they were previously. And I'm reset back to normal with an emergency fund. And the worst case scenario is that I've missed out on some returns for a couple months.
37:42Evan Raidt:Yeah, that completely makes sense. And obviously you talk about automations a lot, but just to really try to hammer that point home, one of the beauties of setting up an automation like this, and if you haven't set up emergency fund automation yet, and if you're able to do it now, it's actually an opportunity because we surprise ourselves with how resilient we are with finances. So you just, you figure out a way to work with what you've got. So you set up the automation and then you figured out how to work with that level of money. And what's beautiful about this emergency fund automation is when you turn that off, now you've got this extra cash that's deployable in other places and you've already figured out how to live without it.
38:30Evan Raidt:And so, I mean, you could be frisky if you want and start spending that, and that's totally cool too, right? Like it's your earned kind of extra income. But that's something that's very powerful that maybe it doesn't sound powerful until you actually live through it. But having things that are automated in your budget and then now all of a sudden it's free, quote, unquote, free money, it's a really great feeling.
38:56Andrew Sather:yeah it's a very powerful position to be in for sure and and like you said people are it's it's funny because simultaneously people are very resilient when they need to be about their finances and then they're also very lenient and willing to spend it when they feel like they have the spare money flying around you know it's it's we kind of fit the size box that we're in at that point if it's a small box then we'll make it do if it's a big box then we will fill it up as quickly as possible human nature right human nature all right andrew it was fantastic chatting with you today and i don't know how but you're a fantastic interviewer it's not like you've been podcasting for for half a decade or anything but anybody out there any listeners let me know what investments account you're currently using whether you currently have an emergency fund how you're holding on to it how you think about i'd love to hear how other people have their emergency funds set up because you know there's always room to learn and hear how other people do things feel free to email me at evan at einvestingforbeginners.com and remember financial freedom is built one smart move at a time keep it simple keep it steady and at any rate i'll see you next time peace
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From the publisher
In this episode of 'At Any Rate,' host Evan Raidt and guest Andrew Sather discuss the often overlooked but crucial topic of emergency funds in personal finance.
Evan shares the importance of budgeting as the foundational step towards financial stability and explains why emergency funds are necessary despite not providing immediate returns.
He highlights the alarming statistic that 60% of Americans cannot afford a $1,000 emergency and elaborates on why having an emergency fund can prevent individuals from falling into debt.
The discussion also covers ideal places to keep your emergency fund, such as high-yield savings accounts and health savings accounts (HSAs), and offers practical advice on setting up and maintaining these funds.
Finally, the conversation touches on the psychological benefits of financial preparedness and the steps to take if you need to rebuild your emergency fund after using it.
00:00 Introduction and Episode Overview
00:41 The Importance of Budgeting
02:45 Understanding Emergency Funds
08:04 Where to Keep Your Emergency Fund
17:16 How Much to Save in Your Emergency Fund
26:54 Automation and Emergency Fund Management
32:17 Conclusion and Final Thoughts
Timestamps are generated by artificial intelligence, and are not 100% accurate depending on the platform used for listening.
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