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Emergency fund means it's a fund used for anything that is... an emergency. It doesn't have to just be a job loss. If your car breaks down and you need a car, you use some of your emergency fund to fix it and then replenish the fund.
It’s an easy way for determining the size of your emergency fund. One of the most disruptive financial emergencies you can have is a loss of job. Most other emergencies fall somewhere underneath that in cost. 6 months of expenses means that if you lose your job you have some time to find a new one.
You are over thinking this. Emergencies funds would be infinitely more complicated if you had to go in and forecast every individual emergency you could possibly have to size your emergency fund off of. By using a simple metric like months of expenses you get something that is fairly practical for most people to calculate easily.
>Edit- I understand a 6 month emergency fund may just happen to have an amount in it necessary ton cover something like an ac unit, and that's great! But it's not what it's intended for.
People can use their Emergency Fund for whatever they want.
If they want to to have a separate account for car or house issues, they can do that.
If they want to pull funds from their Emergency Fund for non-job-loss situations like home repair, that's their prerogative.
That's why it's called "*personal* finance"
Ideally 3-6 month emergency fund should be just for if you lose your job, sure.
But how many people actually save 3-6 months worth of income, and how many people save that much PLUS another healthy emergency fund for actual house and life stuff?
In general its great to have the 3-6 month timeline squirreled away, and better if you can differentiate it from a house slush fund. But in reality most people use it both ways, it just is what it is.
Cause having a 3 month emergency fund, an appliance repair fund, car breakdown fund, and health insurance deductible fund is kind of cumbersome so put it all together in one pot and call it 'emergency fund' with anything over that amount going in to investing.
I think you're just taking the fact that it's often measured in months of expenses as far to a literal restriction for it's uses. You're getting too hung up over the "rule of thumb" for how to determine a personal comfort level of emergency savings, and taking the "rule of thumb" name as a literally restriction that must be imposed on the savings.
>
Correct me if I'm wrong, but what I need to last 6 months has absolutely nothing to do with things like a broken ac unit or a car repair or whatever else.
You're wrong, as proven by the actual uses that people use their emergency fund for.
>Yet I hear people say thank goodness we had our 6 month emergency fund to weather the broken fridge, etc.
You reinforced why you are wrong there.
>A 6 month emergency fund supplies money in the event of a lost job, not in the event of a broken (fill in the blank). Hence why it's called 3-6 months. Why would the phrase 3-6 months correlate to cash flowing a ac unit? It should be 3-6 months savings PLUS an amount that would suffice to replace an ac unit, roof, fridge, etc. Am I wrong? If not, why do people always interchange these?
You are literally explaining in detail why you are wrong.
>Edit- I understand a 6 month emergency fund may just happen to have an amount in it necessary ton cover something like an ac unit, and that's great! But it's not what it's intended for.
Except for the fact that, it absolutely is made for any emergency deemed necessary by the person saving.
I like the way you think.
Personally, I believe an emergency fund is for emergencies. I define emergencies as events I *cannot predict*.
A broken fridge, while it can happen unpredictably, can be something that can be a part of a "house maintenance" fund.
A replacement car would ideally go to a "Car replacement" fund.
I can try and predict some stuff. But I cannot predict everything. The things I neglected to predict for get paid with the emergency fund.
Afterwards, I make a new line item in my budget for whatever I failed to predict. Now I have a "predicted expense" that is no longer a part of my emergency fund.
But I do acknowledge that not everyone thinks this way. And it's a lot simpler to lump all everything together as one big "emergency fund" which also acts as an "et cetera/I forgot to budget for this" fund.
> If not, why do people always interchange these?
Because they do not properly plan for how they are going to deal with the replacement of expensive items.
They should be setting aside a certain amount of money each month IN ADDITION TO their emergency fund to cover repairs to items that may break on their car or house. Your house WILL eventually need a new water heater, roof, fence, HVAC, etc.
It’s supposed to be a starting point or easy rule of thumb just like the popular 50/30/20 budget rule.
For example, I’m an avid YNAB user which is centered on the give every dollar a job rule. I’m saving my health insurance out of pocket max in a separate bucket in my budget than I would for job loss or new car fund. While I’ll earmarking this in my YNAB software, in reality all these savings funds are going into one savings account for simplicity. In reality, if I lose my job, I’ll start pulling money out of the OoP max category in my budget if I need to.
The basis of the 3-6 month emergency fund is to be prepared for emergencies whether it’s job loss, having to pay an auto insurance deductible, the refrigerator breaks, the dog gets hospitalized, your phone gets stolen, you need to fly out of state to grandma’s funeral, etc.
It’s true when it rains it pours, but many people will not have a separate savings account or bucket for each emergency that MIGHT happen.
Your post has been removed [because it is a poll, survey, or request for personal data, experiences, or other types of self-reporting (rule 1)](https://www.reddit.com/r/personalfinance/about/rules). Posts asking for advice should be specific to your situation, not hypothetical or improbable, and include enough information for people to help. - If you would like to post a poll or survey, consider /r/samplesize. - If you would like to post an open-ended question not specific to your situation, consider /r/AskReddit. For example, instead of a post asking "How much do you spend on food?", please ask a question like "I need feedback on my monthly budget (having trouble with food spending).". *If you have questions about this removal, please [message the moderators](https://www.reddit.com/message/compose?to=%2Fr%2Fpersonalfinance&subject=Removal%20help%20request&message=Hello%20moderators,%20.%20%0a%0a%0aMy%20submission:%20https://www.reddit.com/r/personalfinance/comments/1dtvobe/why_do_people_say_their_36_month_emergency_fund/%0a).*
Emergency fund means it's a fund used for anything that is... an emergency. It doesn't have to just be a job loss. If your car breaks down and you need a car, you use some of your emergency fund to fix it and then replenish the fund.
because... those are emergencies ..
It’s an easy way for determining the size of your emergency fund. One of the most disruptive financial emergencies you can have is a loss of job. Most other emergencies fall somewhere underneath that in cost. 6 months of expenses means that if you lose your job you have some time to find a new one. You are over thinking this. Emergencies funds would be infinitely more complicated if you had to go in and forecast every individual emergency you could possibly have to size your emergency fund off of. By using a simple metric like months of expenses you get something that is fairly practical for most people to calculate easily.
>Edit- I understand a 6 month emergency fund may just happen to have an amount in it necessary ton cover something like an ac unit, and that's great! But it's not what it's intended for. People can use their Emergency Fund for whatever they want. If they want to to have a separate account for car or house issues, they can do that. If they want to pull funds from their Emergency Fund for non-job-loss situations like home repair, that's their prerogative. That's why it's called "*personal* finance"
It's a 3-6 month emergency fund, not a 3-6 month unemployment fund. And yes, unemployment is an emergency.
Ideally 3-6 month emergency fund should be just for if you lose your job, sure. But how many people actually save 3-6 months worth of income, and how many people save that much PLUS another healthy emergency fund for actual house and life stuff? In general its great to have the 3-6 month timeline squirreled away, and better if you can differentiate it from a house slush fund. But in reality most people use it both ways, it just is what it is.
Cause having a 3 month emergency fund, an appliance repair fund, car breakdown fund, and health insurance deductible fund is kind of cumbersome so put it all together in one pot and call it 'emergency fund' with anything over that amount going in to investing.
Most of those things you listed cost less than my 6 month emergency fund.
I think you're just taking the fact that it's often measured in months of expenses as far to a literal restriction for it's uses. You're getting too hung up over the "rule of thumb" for how to determine a personal comfort level of emergency savings, and taking the "rule of thumb" name as a literally restriction that must be imposed on the savings. > Correct me if I'm wrong, but what I need to last 6 months has absolutely nothing to do with things like a broken ac unit or a car repair or whatever else. You're wrong, as proven by the actual uses that people use their emergency fund for. >Yet I hear people say thank goodness we had our 6 month emergency fund to weather the broken fridge, etc. You reinforced why you are wrong there. >A 6 month emergency fund supplies money in the event of a lost job, not in the event of a broken (fill in the blank). Hence why it's called 3-6 months. Why would the phrase 3-6 months correlate to cash flowing a ac unit? It should be 3-6 months savings PLUS an amount that would suffice to replace an ac unit, roof, fridge, etc. Am I wrong? If not, why do people always interchange these? You are literally explaining in detail why you are wrong. >Edit- I understand a 6 month emergency fund may just happen to have an amount in it necessary ton cover something like an ac unit, and that's great! But it's not what it's intended for. Except for the fact that, it absolutely is made for any emergency deemed necessary by the person saving.
I like the way you think. Personally, I believe an emergency fund is for emergencies. I define emergencies as events I *cannot predict*. A broken fridge, while it can happen unpredictably, can be something that can be a part of a "house maintenance" fund. A replacement car would ideally go to a "Car replacement" fund. I can try and predict some stuff. But I cannot predict everything. The things I neglected to predict for get paid with the emergency fund. Afterwards, I make a new line item in my budget for whatever I failed to predict. Now I have a "predicted expense" that is no longer a part of my emergency fund. But I do acknowledge that not everyone thinks this way. And it's a lot simpler to lump all everything together as one big "emergency fund" which also acts as an "et cetera/I forgot to budget for this" fund.
> If not, why do people always interchange these? Because they do not properly plan for how they are going to deal with the replacement of expensive items. They should be setting aside a certain amount of money each month IN ADDITION TO their emergency fund to cover repairs to items that may break on their car or house. Your house WILL eventually need a new water heater, roof, fence, HVAC, etc.
It’s supposed to be a starting point or easy rule of thumb just like the popular 50/30/20 budget rule. For example, I’m an avid YNAB user which is centered on the give every dollar a job rule. I’m saving my health insurance out of pocket max in a separate bucket in my budget than I would for job loss or new car fund. While I’ll earmarking this in my YNAB software, in reality all these savings funds are going into one savings account for simplicity. In reality, if I lose my job, I’ll start pulling money out of the OoP max category in my budget if I need to. The basis of the 3-6 month emergency fund is to be prepared for emergencies whether it’s job loss, having to pay an auto insurance deductible, the refrigerator breaks, the dog gets hospitalized, your phone gets stolen, you need to fly out of state to grandma’s funeral, etc. It’s true when it rains it pours, but many people will not have a separate savings account or bucket for each emergency that MIGHT happen.