[Chrissy]

What would you consider an appropriate emergency fund for a family of 4 with one parent working (successful freelancer, but there is some market uncertainty in the field due to AI)?

about 20% of our income is covered by rental income. We are in a HCOL area.

I had considered 1 year of savings to be appropriate, but maybe that is excessive.

I know this is going to vary widely, but I am curious what other small business owners do.

[Rick]

What is your liquid net worth? Meaning removing rentals and primary residence. And the business if it has value.

That liquid net worth matters a ton to me personally when I am deciding right amount of cash equivalents.

If I had less than 3 years of expenses covered by my liquid net worth, I would lean towards 6 months in cash equivalents.

Probably 12 months of self employed single earning family.

But as my liquid net worth rose above 3 years of expenses, the need for cash equivalents begins to fall.

Maybe an extreme example but someone with 25 years of expenses in liquid net worth has zero reason to sit on 12 months of dead weight cash equivalents.

[Frank]

One year is generally a good number if income is variable.

[Jen]

12 months as long as you have kids you are supporting. If you’d be by yourself you could make quick decisions to live in a tent for all it matters, work crazy hours etc…

with kids, little bit more prep needed unless you already live a more alternative lifestyle.

Would also start thinking about possible different jobs/fields to pivot into if AI becomes an even bigger concern.

[Misty]

6 months expenses or 12 months bare bones expenses (mortgage,taxes utilities, food, literally the stuff you can’t cut out)

[Wallace]

3-6 months of expenses at a bare minimum. What are your deductibles in the case of a TRUE emergency? Add that amount. 6-9 months of expenses for most families is sufficient.

Don’t leave it in a checking or savings account. Have it in a HYSA or Money Market account earning 4-5% at least.

How much debt do you have? Reducing debt can drastically reduce the amount needed in your emergency fund.

[Author]

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