Why You SHOULDN'T HAVE An Emergency Fund (You Will Lose $250,000)

Saving an Emergency Fund is one of the most popular bits of financial advice.

Almost every YouTuber and finance guru including Dave Ramsey himself will tell you that building an emergency fund is the best thing you can do with money.

And yet I don't have an emergency fund.

And I actually think that if most people thought about it, they'd probably choose to not have an emergency fund either.

An emergency fund can feel like the sensible thing to do - it can help you navigate through expensive emergencies or pay your bills if you lose your job.

But the truth is that keeping the money sat in cash can cost a person on an average wage $250,000 over their working life.

Suddenly the idea of keeping a few thousand dollars sat in a bank account for the rainy day doesn't sound as appealing.

Although the problems of needing access to money urgently do exist and sometimes life will throw you lemons, an emergency fund is not the best solution to those problems.

Most people can navigate those same issues through a combination of using credit cards and cashing in on their investments.

And at first those options sound really bad. Getting into debt and selling off investments is not sensible, right?

But when you work the numbers, you realise that using your credit card to bail you out when you need it will be 15x cheaper than keeping an emergency fund.

And that is a startling realisation that is worth thinking about when you're deciding how to manage your finances.

💵 GREAT INVESTING APPS I USE
👍 SUBSCRIBE TO MY CHANNEL

DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.

DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.

[annagilda]

Mathematically, you are right. An emergency fund doesnt make sense.

BUT, from a living a sensationally peacefull life, i cant explain the importance of having one.

[yinkajpsp]

The emergency fund for most people is the peace of mind aspect. Alot of people would sacrifice potential gains for peace of mind.

[danchanner]

Some of us are old enough to remember everyone doing something similar to this back in the 1980s. When the big downturn came they got burned.

[kamj]

The most extremely rare scenarios happen all the time to people that aren't financially stable. People also have a tendency to lack discipline. The above video should have a disclaimer: This is the IDEAL situation. Unfortunately suffering seems to be unfairly distributed so if you aren't super rich you will need an emergency fund - what I've learned from being around rich people is this:
1. NEVER sell off your assets.
2. Borrow only what you can easily pay back. Meaning if you don't have at least £5-6k sitting in your bank account already, do not borrow the £8k emergency money

Super disappointed in the video. Only follow if you have daddy's money to fall back on


Edit: people who earn an average salary and below have less line of credit. It is highly unlikely they will be allowed to borrow such a high amount

[tefkas]

Some bills cannot be paid with a credit card (such as mortgages and most things that go via direct debit). If you haven't got emergency cash to use have a plan to shift you spending, so these bills are paid with the cash you have and everything else (food, fuel, etc.) is paid on credit cards. If you have an overdraft limit make sure this is only used for cash/direct debit bills so you have the facility for longer.

[brybry]

An emergency fund isn't just some dillusional idea that your cars going to randomly fail or your pipes are going to burst. It's for the guarenteed unexpected expensive thing you need to pay for thats beyond your monthly income during the year which can happen to ANYONE. A friend out of nowhere asks you to come on vacation, a family member gets sick and you need to take care of them or a random person gets married. Random health issue where you need to take off work. Why the hell would you put yourself in a situation where you that have to stop your money snowball or you have to uncomfortably run up a credit card with large interest payment. Your "plan" is guessing the markets "AVERAGE" return. The markets average return could be 5 years of negative returns and 5 years of crazy bull runs. Nothings guaranteed with an average.

[luisjiron]

Nah, it’s always good to have liquid. You can always invest later.

[jasonwilliamconsulting]

Agree to disagree. High-yield savings account?

[uo]

I love you you dare to challenge the common wisdom and beliefs. Few people do that.

[trackee]

If you have kids, no. I don’t agree. Also, my emergency fund has a 5% annual return right now - so my money is still working.

[barrbarru]

the emergency fund is not meant to be an investment. it's insurance against life, then you invest extra money after that. you lost me at "using credit card" girl, bye

[rtfunn]

I think that an emergency fund is a psychological tool to get you away from a scarcity mindset. I built up an emergency fund and then invested most of it. As I made more money, I created a positive emergency fund. I have just as much as my old negative emergency but it will be to buy the next big dip in the market

[LetzEat]

The only thing missing from this rubbish is a laugh track.

[motoshark]

There's more to money than numbers. A real and accessible emergency fund is a psychological foundation to building wealth and breaking bad habits while living paycheck to paycheck.

[chriss]

You might be undervaluing the peace of mind of knowing you’re covered for almost any emergency without worrying…

Also, having at least a 1K emergency fund builds discipline, and will cover a lot of the mundane but still unexpected emergencies…

And there are better options than <1% interest at the big banks…

[josemascarua]

It's not just for emergencies that you should have money but for unexpected opportunities that arise and sometimes it's not a good time to sell your long term investments neither to finance your ambitions with debt.

[SaadonAksah]

Hehe..its still an emergency fund, only its saved in a place with high returns 😂

[bLd]

One of the worst advice I heard on YouTube. Invest your emergency fund and go into debt in case of emergency. Scenario with market crash combined with lose of job is not very rare. It happend 2 times in last 12 years - 2008-2009 and 2020.

I would rather keep one month of expenses in cash and put rest of my emergency fund into government bonds that pays above inflation to keep it's value. Then I can invest my other funds knowing that in case of emergency I will not have to sell my assets at loss. I prefer buying assets after market crash rather than selling - you know, buy low, sell high.

[BaileyMxX]

My main critique to this is, if you don't see having an emergency fund as prudent then you sure as Heck won't have cash on hand either. What do you do if the market offers a quick fire sale? Think a few month 30%+ drop? You'd surely only have that months pay, any dividends paid to you and whatever non stock assets you can sell/piling that months expenses on credit card.... That's not dry powder...

[DafyddMorse]

I fully agree! I think you’re forgetting one thing though. Most people don’t like mathematics. Most people who are on the same wavelength as you on this point won’t ever need an emergency fund!