» My emergency fund (transfer) in action Early Retirement Extreme: Financial independence, frugality, self-sufficiency, ecology, capitalism, and voluntary simplicity

Published on January 28th, 2008

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Today I went to my new dentist for the first time. I was pleasantly surprised since they did not seem to have a ton of fancy gadgets in their clinic. This generally means that they don’t have huge debts to pay off which should make customers pay less. Not me though, apparently a filling that was done on one of my molars a few years ago now has a cavity below it - botched job - big thanks ex-dentist. This means I need to have a crown put in. It came to $1200!

Now, I’ve written earlier why I don’t have an emergency fund, so how did I deal with this unexpected need for money. Simple. I charged it on my credit card. It’s a capital one card because they were the first company that did not to offer me outrageous (e.g. subprime) terms when I wanted to establish a credit history about a year ago. It was also quite easy to set it up to automatically pay off the balance automatically each month. So when I came home today all I had to do was to transfer the amount from my ING Direct account to the checking account [of my bank] that the credit card draws on. Having cash saved was not an issue. Due to market conditions, I currently maintain a cash position of about 30%. This is useful for picking up stocks on sale or dentist bills as it may be, so there you have it. That’s how my emergency fund system works.

8 users responded in " My emergency fund (transfer) in action "

SJean said, in January 28th, 2008 at 8:37 pm

I think that having a bunch of cash in ING direct pretty much constitutes an emergency fund. Most people, when they say efund, are talking about money in a high yield savings or stable value brokerage account.

Jacob said, in January 28th, 2008 at 9:09 pm

That’s not a good place to keep liquidity though. It usually takes a few days for the money to be accessible and that can be a problem (I’ve had exactly that problem. That was no fun.). I know my broker offers a debit card so that would be another option. I prefer the credit card though since it offers some consumer protection as well as 20 days of float.

mjmcinto said, in January 29th, 2008 at 6:00 am

That’s pretty much my wife’s and mine emergency policy. I just put it on my CC, and then transfer the money needed to cover the expense from our emigrant direct account. Though I’ve always considered my savings account my emergency fund, and not my CC. Then again I also charge just about everything on my credit card since I love cash back (I also pay the full balance every month)

lulugal11 said, in January 29th, 2008 at 6:23 am

@ Jacob.
ING’s Electric Orange checking account has a debit card so you can easily access the money so liquidity should not be a problem.

They also have a network of FREE ATMs that you can access so you do not even have to worry about the ATM fees.

moneymonk said, in January 29th, 2008 at 10:13 am

So technically you DO have an emrgency fund. You may just call it cash reserves. Same thing you had the cash to clear the cc account balance.

As long as you have the cash for sudden expenses, who cares about the verbage.

chef said, in January 29th, 2008 at 10:41 am

ING Checking also offers instant transfers from savings (higher interest) to checking (accessibility)

I love those guys

Jacob said, in January 29th, 2008 at 4:39 pm

@ moneymonk - the cash balance is part of my asset allocation. My beef is with the idea of creating a designated emergency fund and having money specifically reserved for emergencies.

Philip Brewer said, in January 30th, 2008 at 6:17 am

It doesn’t really matter whether you have a separate “emergency fund” or you just make sure the cash portion of your overall asset allocation is ample. I do worry a bit, though, about relying on a credit card for emergency liquidity.

A credit card (or a HELOC, which some people use) works fine when everything’s going along okay in the financial system. But when the financial system is stressed, banks are prone to do things like reducing credit limits, canceling lines of credit, or just getting out of the credit card business. And it’s all too likely to happen right at the moment when you needed to access that money.

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