Tuesday, August 1, 2017

Is your family on the same page?

My mum knows what I am going to do in a market crash. I am going to empty my bank accounts in all their entirety and dump it into the stock market. This is not news to her. I have shared with her plenty of times my plan of action. However, I think it didn't register in her head until recently when she clarified what do I mean when I say I am going to empty my bank accounts.

Is it a figure of speech or is it a literal statement?

When she realized it was the latter, she became momentarily concerned. Am I out of my mind?

To allay her fears, I shared that it is for this purpose that we have an emergency fund in place. Of course, the larger the emergency fund, the greater the peace of mind it provides. Only extra cash, above and beyond the emergency fund, is allowed to be used in market crashes. The emergency fund is to be used only for the purpose it was designed for.

My mum and I share an interesting arrangement as to our emergency fund. Yes, we both contribute to and tap on the same fund. While she has been the major contributor for a long time, I have since began taking a more active role in contributing. Currently, our emergency fund stands at around $11000. For two people, it is indeed underwhelming. Psychologically, she is more comfortable if the figure is around $20000 instead. Hence, I will be redirecting more of my work income into the fund from now on.

To further mitigate her fears, I reminded her of our collection of pet rocks. Last I checked, our pet rocks are worth around the $20000 comfort figure. So all is not too bad.

It is for this reason why I don't include emergency funds as part of my net worth. First, it is shared. Second, it makes no sense to delude myself into thinking that I have a higher net worth than what I really have. My personal understanding of an emergency fund is a fund that is deployed to serve a defensive function. It is not chump change which I can use for any of my whims and fancies.

So what constitutes an emergency, since we are into definitions? We reached some pretty common agreements as to what constitutes an emergency:

- Accidents
- Hospitalization
- Emergency medical treatment
- Urgent home repairs
- Job loss

Note: we have insurance. We are referring to cash-on-hand to deal with any exigencies before the insurance companies pay up.


  1. During emergency, cash is king. Same as when market crashes.

    1. Wah Uncle CW,

      You comment so early in the morning! Enjoy your trip and have fun!

  2. Unintelligent Nerd,

    Some confuse insurance as in no need to pay... Forgetting that often we have to pay upfront in cash first, then claim later...

    An emergency fund is like having a backup parachute, first aid box or fire extingusisher at home.

    Most of the time its there gathering dust. But when we need it, boy are we glad we have one nearby ;)

    Our 5,000 years of collective wisdom:

    Far water cannot save near fire.

    1. Hi SMOL,

      That's why I'm perfectly fine with 0% interest rate. "Biscuit tin" don't yield anything but it's more immediate than SSBs, FDs, and what not.

  3. Hihi... 1st time comment here... actually can put inside bank account... although interest rate less than 1% but is still better than 0% if put inside biscuit tin... just a small small suggestion hope u dont mind i kaypoh... hehehe


    1. Hi Sy Sy,

      Welcome to my blog! I love to hear from readers :D

      Yup. I keep a mix between CIMB's FastSaver (1% interest per annum) and biscuit tin. Good to diversify. :)