Sunday, December 15, 2013

Your emergency funds - How much is enough? (Warning: Dark content)

There is a general guideline of 6 months - 12 months.

I think that is arbitrary. First, 6 months of $2000 is rather different from 6 months of $10K

We need to understand the nature of our job, how easy is it to lose our job, or is it a iron rice bowl.

I consider my job an iron rice bowl job. (I traded high pay for security if you like)

Next, how cover are you and your family when accident or illness strike?

Is there any existing illness that are excluded in your H&S plans for you and your immediate family. My wife is diabetic, so there is plenty of problems getting H&S, so we need to have good shield plans as alternative.

So, if you also have an iron rice bowl, and all your immediate family are covered, does it mean you can have a lower emergency fund of 1-2 months?

I think I miss out a very important equation in my calculation until it dawns on me very strongly.

Aging parents.

With parents, I mean both your in-laws and your biological parents.

They are from the generation, whereby insurance is a dirty word, most of them, except the savvy ones will not have accident plans or H&S, when you are aware, their age is most probably too old to get H&S plans anymore(Not economic with too many exclusions)

I am young, but I am at the stage whereby I attend my friends' elders wakes and funerals rather often, some are down with chronic illness that wiped out their child savings.

Also, what about the aftermath? Even if the elders are financially independent, you couldn't be asking the windowed for money to settle the funeral or pay the hospital bills first isn't it?

Money, when it is available, is last of thing you want to worry about when tragedy struck, but is the first thing you worry about if you do not have enough of it. And trust me, when you do not have enough of it, there will be quarrels and finger pointing, shirking of responsibilities.

I know when my time comes, I want to go in a dignified manner, not with my kid/s quarreling and my wife weeping at my deathbed. I also told me wife straight in the face when she asked if I would prefer she goes first or I go first... I said:" she, because I know I can settle everything nicely for her, and I can take all the stress and emotional onslaught, whereas if I were to go first, she will have a lot of trouble, and I will have a lot of worries." She agreed.

Although both my parents and in-laws do not need intimate care now for their daily needs, we must prepare for the eventuality that the time will come, it would be good if we are able to get a domestic helper or our job allow us some time to shuttle between home and hospitals. Such is life.

Of course, we can never have enough, and soft emotional support is more important and warmth than cold hard cash. That's why we need to build our emotional wealth too, able to take each day as a blessing and all misfortune in its stride, there is only that much cash can help. But the lack of cash, complicate matters.


  1. Hi, I thought the general guideline for emergency fund has always been 6-12 months of monthly expenses.. and not .monthly salary

  2. Hi sillyinvestor,

    I think a better way is to use expenses instead of income. I see emergency funds as how many months you can last without having a job or until you can find a new job. if you think that 3 months is comfortable enough (i.e. 3 months of expenses, all in), then go ahead. As your expenses go up with age, or responsibility, your required emergency fund might have to be updated both in terms of amount (instead of $2k per month, now it's $3k) and also the multiple (instead of 6 mths, now it's 9 mths).

    But how this is content dark?

  3. Hey, so coincident I wrote something about parents insurance, yea definitely dirty word for them, choy choy choy! I upgraded their h&s nevertheless what they says because I know eventually I have to pay when things go extremely wrong! How many mths emergency fund also no enough....

    Never say never! I got my wife to cover for my in laws as well.

    All and all, cover them ultimately is cover me!! Crude but so so true.....

  4. Hi sillyinvestor,

    I have two emergency funds - one for myself and another for my parents. For myself, I have insurance to take care of most of my needs thus I set aside 6 months.

    My parents on the other hand only have basic insurance and almost no savings. Therefore their emergency fund also double up as their retirement account. This fund/account is forever growing. I'm fortunate that my parents are still working so on top of my own contribution, they are able to contribute a small amount as well.

    Like LP, I see the emergency fund as a buffer in the event I'm out of a job. No amount is sufficient to cover all emergencies, we just have to decide base on our comfort level.

    LP, maybe the dark content refers to talking about "death", "illness" etc. My parents like to say Choi!


  5. Haha hunter,

    U are right, me silly, got it mixed up. Thanks for telling

  6. The dark content like Derek point out, is about death and sickness, taboo for the elder generation. ESP when we are welcoming the new year. Do u know most of my older colleagues also go for the free med check up and always refused to upgrade for a more comprehensive check. They say doc cheating money, but I think most just dun think they can take the truth.

    I am in my mid 30s, I was diagnosed with thyroid 3 years ago and fatty liver this year, lucky I always do comprehensive check. For thyroid I took med for 1.5 years and I never had a relapse till now. I have been without med for almost 2 years and my thyroid reading is still good. I tried to get my loading reduced for 1 recent CI plan but got no reply. See how insurance companies earn money...

    That's why I alway tell my wife, some money cannot be saved. I just need to watch my diet more closely since I have family history of all sorts of nonsense

  7. Ya true .. I have problems getting my mum for a check up... Almost quarrel but to no avail. Just have to keep fingers closed.

  8. Haha Derek;

    U sure know what I mean!!

  9. Not dark to me...just realistic ;) It's like that one lah. Buying insurance doesn't mean that you can claim later, but if you don't buy, definitely can't claim. Have to do a bit of self insurance in the end because who knows what the medical fees are like when we really need them years down the road? The 500k that we got today might just be peanuts years later. This is exactly what some of my older friends had mentioned. They had, wisely, bought a 20k insurance plans - which is like a huge amount in the 80 and 90s. But now? Can't even buy a piece of paper to own a car.

  10. Hi sillyinvestor,

    I completely understand what you wrote in this post.

    Just before my grandma passed away, there were constant quarrels between my relatives (uncles, aunties etc etc) over money matters. Everyone has their own ideas. Which hospital to go to? Which nursing home to go to? Should employ maid or not?

    It almost tore them apart.

    These uncles and aunties did not seem to care that they are actually setting a very bad example for the grandchildren. Sigh....... :(

  11. Hi DW,

    Usually the lack of or the excess of money is root to evil. But how much is enough, some people can never have enough.

    I know of ppl who complain non-stop even during their overseas leisure trip. There are also many with make do with whatever they have. Peace lies within ...

  12. nevertheless. Hope you got them well covered already since many privacy H&S doesn't require any body check up but need self declaration. I cover my dad (stroke history) with Aviva, they just exclude whatever you declared. 没鱼虾也好!

  13. Sg fund,

    The exclusion is not just on existing conditions but also implications arising from existing conditions.

    Basically, if u are diabetic or have hypertension, u can forget about H&S.

    That's why I thought the govt recent move fr universal coverage of shield plans without cherry picking is a good step in the right direction, although it will be fraught with difficulties like affordability and etc.

    But better to cover 70% of the vulnerable and get civil organ to close the gaps. As the govt also do in their planning, the most economic way.. Although might not be the most compassionate...

    Well, a perfect solution for imperfect humans will never work anyway

  14. Finally our Govt is moving the right way in terms of health care!

    With regards to H&S, I agreed that exclusion includes arising complications but I disagree with forget about H&S saying. There are many other kinda of illnesses for example cancer related illnesses that are not associated with diabetes and hypertension that could still be covered by the private H&S.

    Although we cannot get them 100% covered, 60-70% is also important since you do not know what's going to happen in the future. Simply a hedged position in investment perspective. Just my 2 cents.

  15. It's also good to be prudent. I ask my wife to get the upgraded shield plan despite exclusion. But for the elderly, it might not make sense anymore economically with all the exclusions. They would rather keep the cash

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