What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund?
Here's a few. Is this what you're looking for? Also this should probably be a community wiki. "Some things are nearly universal, and have been mentioned already.  My ""favorite"" forseeable expenses in this category are: However, I also advocate saving for expenses that are specific to you.  Look back on your expenses for the last 12 months, minimum (18 or 24 may be better).  Ask yourself these questions: I ask about large expenditures because you may make enough that you can ""eat"" these lapses in budgeting, as I did for many years.  It is not an emergency now, but it turned into an emergency down the road as my spending went out of control.  Look at all expenditures over a certain level, say $100 or $200.   Some personal examples of expenses that aren't quite so universal, but turned into small emergencies: This last one was rather unexpected.  It is the reason why I ask the question ""why didn't I budget for it?""  These fees and dues are for my professional-level certifications.  In my industry, they are ""always"" paid for by the company.  A year ago, they weren't paid by my former employer because they planned to lay me off.  This year, they weren't paid by my present employer because I am technically a temporary worker (4 years is temporary?).  So, from now on, I plan to save for this expense.  If my employer pays my dues, then I stop saving for the expense, but keep the money I've saved." "Annual property tax and home insurance come to mind as things that are easily forgotten, but surely the biggest true, ""I didn't see that coming,"" is a major car repair. There are a number of things that can go wrong with a car with little warning and end up costing a thousand dollars or more.  Since most people are dependent upon their car for getting to work, doing anything but fixing or replacing the car is not an option.  If you fix it, that's an out of pocket expense that most aren't prepared for.  If the car has some age, you might be inclined to replace it, but doing so in a rush costs a lot more than taking your time in such a decision." The way you ask this is interesting, it implies (quite correctly) that for many, an annual bill for house insurance, property tax, etc, can turn into an emergency. My answer to the true emergency is a breakage that can't be foreseen (although you have to know the furnace isn't going to last forever) or a medical bill that's not covered (our dental is limited and the Mrs root canal can be $1000 out of pocket) insurance premiums  My annual car premium always caught me off guard until I set up a dedicated savings account for it. Extended illness/disability that prevents you from being able to work. Edit: Leigh Riffel: So, why should this be expected, and how should it be planned for? Some of us may be fortunate enough that this never happens, but I've known enough unlucky people to have seen that it can and does happen. Prepare for it with: While it is true that homeowners insurance will cover emergencies, it is very important to check and make sure that your policy is covering everything that it needs to. A great example is what happened to all of those without flood insurance in Tennessee last year. You may opt not to get additional coverage, but then you should make sure that you are setting aside funds for such a catastrophe. The most obvious one these days is unexpected and extended unemployment. If you are living paycheck to paycheck, you are asking for trouble in this economy.
First you should maintain a monthly expense and find out the burn rate. There would be certain expenses that are annual but mandatory [School fees, Insurance Premium, Property Taxes, etc]. So the ideal emergency fund depending on your industry should be 3 month to 6 months plus your mandatory yearly payments, more so if they come together. For example Most of my annual payments come out in May and I bank on the Bonus payout in April to cater to this spike in expense. So if I were to lose a job in March, my emergency funds would be sufficient for routine expenses, if i don't provision for additional funds Second you need to also figure out the reduced rate of monthly burn and ideally the emergency funds should be for 3 months of normal burn and 6 months of reduced burn. "I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term ""unexpected expenses"". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a ""base amount"" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say ""in the long term"" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you  will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account." "Discussions around expected values and risk premiums are very useful, but there's another thing to consider: cash flow. Some individuals have high value assets that are vital to them, such as  transportation or housing.  The cost of replacing these assets is prohibitive to them: their cashflow means that their rate of saving is too low to accrue a fund large enough to cover the asset's loss. However, their cashflow is such that they can afford insurance. While it may be true that, over time, they would be ""better off"" saving that money in an asset replacement fund, until that fund reaches a certain level, they are unprotected. Thus, it's not just about being risk averse; there are some very pragmatic reasons why individuals with low disposable income might elect to pay for insurance when they would be financially better off without it." I agree.  Those people should have saved up money before they bought that car to get to work, before they went to school to learn how to do that job.  And they definitely shouldn't have gotten hurt and went to the hospital.  These people living [beyond there means] are clearly spending money on things they shouldn't thought to buy.  /s This might vary from other answers but I generally prefer to use debt before touching an emergency fund.  But one of the reasons I have an emergency fund is to that I can make sure I can cover any debt payments.  Essentially, this give you leverage.  You might start off with a small emergency such as needing a new refrigerator.  If you pull the cash out of the fund to pay this off immediately, you've depleted your account and if something major comes along, you might be short.  By using debt, you can often cover the costs with cash-flow and leave your risk buffer in place. Often, retailers will offer really sweet financing deals.  0% for 12 months or whatever.  Often, though, if you don't pay it off in time, they can be costly.  I'm not sure if this is legal (in the US) anymore but if it wasn't fully paid off in time, you'd be retroactively charged interest on the whole amount.  But if you have an emergency fund, you pretty much guarantee that won't happen.  The only time it will is if something else happens that requires the emergency fund to be cashed in.  But if things are that dire, the debt is unsecured.  You're credit may suffer but they can't come after your assets. It's not an either-or situation.  You give yourself options by having the cash available.  It allows you to take advantage of opportunities that might be too risky otherwise.  Ultimately what you want to be able to weather the storm in a situation where you have, say, a mortgage on a house that is underwater, the stock market is down, and you have no income.  In that situation, you don't want to liquidate your stock when it's down and you (probably) don't want to lose your home equity in a foreclosure. Yes, it should be. As, where one has insurance, its an expense one would expect one to continue to incur in a normal budgetary emergency, even drop in the extreme. "Two typical responses to articles/surveys making such claims:  **1. People use other forms of asset for emergency savings because interest rates are low - clearly false.**  **2. People use other forms of saving than a saving account therefore such surveys as the X% can't handle a $500 emergency are wrong on their face - this is false the vast majority use a savings account.**  I've chosen a topic that absolutely annoys the shit out of me every time it comes up, how people save their money. Every time this topic comes up about X% of americans can't come up with $Y dollars in an emergency or have less than $Z in savings someone inevitably chimes in with the linked response. I have *never* seen anyone attempt to source their hand waving response beyond their own anecdote, which is usually a thinly veiled brag about how financially savvy they are with their wealth. Perhaps people who have no assets, or crippling debt don't go out of their way to brag about it...  I could link multiple reddit posts making a similar response, which I address with my own stock response about once every 1-2 months. Instead I've decided to expand with data from several other sources. This is the prototypical good/bad research problem. If you're asserting something, but qualify your statement with, ""I""m sure we'd find...if we looked into..."" then you're doing it wrong. A good researcher or journalist doesn't put bullshit like that in their work because it's their job to actually look for sources of data; data which should exist with multiple government and independent groups. So let's get started (all data as recent as I could find, oldest source is for 2010):  * [Most americans don't invest in the stock market](https://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf)  About 48.8% of americans owned publicly traded stock directly or indirectly, with a much smaller percent (13.8%) owning stock directly -  pages 18 and 16 respectively. It's important to note the predominance of indirect ownership which suggests this is mostly retirement accounts. It's entirely possible people are irresponsible with their emergency savings, but I think it safe to say we should not expect people to *dip into their retirement accounts* for relatively minor emergency expenses. The reason is obvious, even if it covers the expense they now have to make up the shortfall for their retirement savings. This is further supported by the same source:  &gt;""The value of assets held within IRAs and DC plans are among the most significant compo-nents of many families’ balance sheets and are a significant determinant of their future retirement security.""  Ibid (page 20, PDF page 20 of 41)  There is also a break down of holdings by asset type on page 16, PDF page 16 of 41.  * [This data is skewed by the top 10% who keep more of their wealth in different asset types.](http://www2.ucsc.edu/whorulesamerica/power/wealth.html) For a breakdown between the 1st, 10th, and 90th percentiles see **table 3.**  So far it seems pretty hard to maintain a large percent of americans have their wealth stored outside of savings accounts, mattresses aside.  * [Here's my original reply as to the breakdown of americans assets by type and percent holding.](https://imgur.com/a/DsLxB) Note this assumes people *have* assets. [Source for images/data.](https://www.census.gov/people/wealth/data/dtables.html)  Most people use savings accounts, with runner up falling to checking accounts. This will segue into our next topic which is the problem of unbanked/underbanked households.  * [A large number of individuals have no assets; breaking down by asset types assumes people *have* assets in the first place.](https://www.fdic.gov/householdsurvey/)  To quote the FDIC:  &gt;*""Estimates from the 2015 survey indicate that 7.0 percent of households in the United States were unbanked in 2015. This proportion represents approximately 9.0 million households. An additional 19.9 percent of U.S. households (24.5 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system.""*  That's right there are millions of households *so finance savvy* they don't even have banks accounts! Obviously it's because of low interest rates. Also, most people have a checking account as well as savings account, the percent with ""checking and savings"" was 75.8% while those with ""checking only"" were 22.2% (page 25, PDF page 31 of 88). It's possible in some surveys people keep all their money in checking, but given other data sources, and the original claim this fails to hold up. If the concern was interest rates it makes no sense to keep money in checking which seldom pays interest.  This survey also directly addresses the issue of ""emergency savings"":  &gt; *""Overall, 56.3 percent of households saved for unexpected  expenses or emergencies in the past 12 months.""* (page 37, PDF page 43 of 88)  Furthermore:  &gt;*""Figure 7.2 shows that among all households that saved for  unexpected expenses or emergencies, savings accounts  were the most used savings method followed by checking  accounts:* **more than four in five (84.9 percent) kept savings  in one of these accounts.** *About one in ten (10.5 percent)  households that saved maintained savings in the home, or  with family or friends.""*   Emphasis added.  * [Why don't people have wealth in different asset classes? Well they don't save money.](http://cdn.financialsamurai.com/wp-content/uploads/2014/06/savings-rates-by-wealth-class.png)  This is further supported by the OECD data:  * [Americans ""currency and deposits"" are 13% vs 5.8% for ""securities and other shares"" as % of total financial assets.](https://data.oecd.org/hha/household-financial-assets.htm)  Additionally:  * [Interest earning checking accounts: 44.6% of american households (second image)](https://imgur.com/a/DsLxB)  * [""Among all households that saved for unexpected expenses or emergencies, savings accounts were the most used  savings method followed by checking accounts..."" (page 7, PDF page 13 of 88)](https://www.fdic.gov/householdsurvey/2015/2015report.pdf)  * ~70% saved for an emergency with a savings account vs ~24% who used checking. *Ibid.*  In fairness the FDIC link does state *banked* americans were more likely to hold checking accounts than savings accounts (98% vs ~77% respectively) but that doesn't mean they're earning interest in their checking account. It's also worth noting median transaction account value was for 2013 (this is the federal reserve data) $4100." Regarding Medical insurance premiums - The premiums are only part of the cost. You need to know if you have a deductible, your out of pocket maximum and what co-pays you have. If you take medications on a daily basis you need to account for those costs. Some programs allow you to put money aside pre-tax to pay for these known expenses.  I would split Emergency fund / general savings into two lines. You can set a goal to save X months worth of expenses as an emergency fund, but the general savings will be whatever is left over from the rest of your budget. Unless you have a goal for the savings: car, home... I don't see why it would be any harder to sell stocks or bonds than it is to sell a CD you may have.  Not to mention for large one time expenditures you can usually cover these with a credit card.  This gives you about a month to move money around to pay your credit card off in a timely manner without incurring a charge. I have had no problem getting a credit limit beyond 4-5 months of expenses for myself on a single card. I can't even think of a household emergency that you can't pay for with a credit card. Job loss situations are not going to require large amounts of money immediately. True catastrophic emergencies (natural disasters, ransoms) however will need fast cash potentially. However in this case the only thing that is good is having cash on hand. As you can't count on ATMs or Bank systems to be functional. Even more serious emergencies such as zombies, the end of world, or anything that involves total economic collapse would require things that are not cash. You would need to invest in things like supplies, shelter, guns and maybe shiny metals that may have value. "I'm afraid you have missed a few of the outcomes commonly faced by millions of Americans, so I would like to take a moment to discuss a wider range of outcomes that are common in the United States today. Most importantly, some of these happen before retirement is ever reached, and have grave consequences - yet are often very closely linked to financial health and savings. Not planning ahead long-term - 10-20+ years - is generally associated with not planning ahead even for the next few months, so I'll start there. The most common thing that happens is the loss of a job, or illness/injury that put someone out of work. 6 in 10 adults in the US have less than $500 in savings, so desperation can set in very quickly, as the very next paycheck will be short or missing. Many of these Americans have no other source of saved money, either, so it's not like they can draw on retirement savings, as they don't have that either. Even if they are able to get another job or recover enough to get back to work in a few weeks, this can set off a desperate cycle. Those who have lost their jobs to technical obsolescence, major economic downturns, or large economic changes are often more severely affected. People once making excellent, middle-class (or above) wages with full benefits find they cannot find work that pays even vaguely similarly. In the past this was especially common in heavy labor jobs like manufacturing, meat-packing, and so on, but more recently this has happened in financial sectors and real estate/construction during the 2008 economic events. The more resilient people had padding, switched careers, and found other options - the less resilient, didn't. Especially during the 1970s and 1980s, many people affected by large losses of earning potential became sufficiently desperate that they fell heavily (or lost their functioning status) into substance abuse, including alcohol and drugs (cocaine and heroine being especially popular in this segment of the population). Life disruption - made even more major by a lack of savings - is a key trigger to many people who are already at risk of issues like substance addiction, mental health, or any ongoing legal issues. Another common issue is something more simple, like loss of transportation that threatens their ability to hold their job, and a lack of alternatives available through support networks, savings, family, and public transit. If their credit is bad, or their income is new, they may find even disreputable companies turn them away, or even worse - the most disreputable companies welcome them in with high interest and hair-trigger repossession policies. The most common cycle of desperation I have seen usually starts with banking over-drafts, and its associated fees. People who are afraid and desperate start to make increasingly desperate, short-sighted choices, as tunnel-vision sets in and they are unable to consider longer-term strategy as they focus on holding on to what they have and survival. Many industries have found this set of people quite profitable, including high-interest ""check cashing"", payday loans, and title loans (aka legal loan sharks), and it is not rare that desperate people are encouraged to get on increasing cycles of loan amounts and fees that worsen their financial situation in exchange for short-term relief. As fees, penalties, and interest add up, they lose more and more of their already strained income to stay afloat. Banks that are otherwise reputable and fair may soon blacklist them and turn them away, and suddenly only the least reputable and most predatory places offer to help at all - usually with a big smile at first, and almost always with awful strings attached. Drugs and alcohol are often readily available nearby and their use can easily turn from recreational to addictive given the allure of the escapism it offers, especially for those made vulnerable by increasing stress, desperation, loss of hope, isolation, and fear. Those who have not been within the system of poverty and desperation often do not see just how many people actively work to encourage bad decision making, with big budgets, charm, charisma, and talent. The voices of reason, trying to act as beacons to call people to take care of themselves and their future, are all too easily drowned out in the roar of a smooth and enticing operation.  I personally think this is one of the greatest contributions of the movement to build personal financial health and awareness, as so many great people find ever more effective ways of pointing out the myriad ways people try to bleed your money out of you with no real concern for your welfare. Looking out for your own well-being and not being taking in by the wide array of cons and bad deals is all too often fighting against a strong societal current - as I'm sure most of our regular contributors are all too aware! With increasing desperation often comes illegal maneuvers, often quite petty in nature. Those with substance abuse issues often start reselling drugs to others to try to cover lost income or ""get ahead"", with often debilitating results on long-term earning potential if they get caught (which can include cost barriers to higher education, even if they do turn their life around).  I think most people are surprised by how little and petty things can quickly cycle out of control. This can include things like not paying minor parking or traffic tickets, which can snowball from the $10-70 range into thousands of dollars (due to non-payment often escalating and adding additional penalties, triggering traffic stops for no other reason, etc.), arrest, and more. The elderly are not exempt from this system, and many of America's elderly spend their latter years in prison. While not all are tied to financial desperation as I've outlined above, a deeper look at poverty, crime, and the elderly will be deeply disturbing. Some of these people enter the system while young, but some only later in life. Rather than homelessness being something that only happens after people hit retirement, it often comes considerably earlier than that. If this occurs, the outcome is generally quite a bit more extreme than living off social security - some just die. The average life expectancy of adults who are living on the street is only about 64 years of age - only 2 years into early retirement age, and before full retirement age (which could of course be increased in the next 10-20 years, even if life expectancy and health of those without savings don't improve). Most have extremely restricted access to healthcare (often being emergency only), and have no comforts of home to rest and recuperate when they become ill or injured. There are many people dedicated to helping, yet the help is far less than the problem generally, and being able to take advantage of most of the help (scheduling where to go for food, who to talk to about other services, etc) heavily depends on the person not already suffering from conditions that limit their ability to care for themselves (mental conditions, mobility impairments, etc). There is also a shockingly higher risk of physical assault, injury, and death, depending on where the person goes - but it is far higher in almost every case, regardless. One of the chief problems in considering only retirement savings, is it assumes that you'll only have need for the savings and good financial health once you reach approximately the age of 62 (if it is not raised before you get there, which it has been multiple times to-date). As noted above, if homelessness occurs and becomes longstanding before that, the result is generally shortened lifespan and premature death. The other major issue of health is that preventative care - from simple dentistry to basic self-care, adequate sleep and rest, a safe place to rejuvenate - is often sacrificed in the scrambling to survive and limited budget. Those who develop chronic conditions which need regular care are more severely affected. Diabetic and injury-related limb loss, as one example, are far more likely for those without regular support resources - homeless, destitute, or otherwise. Other posters have done a great job in pointing out a number of the lesser-known governmental programs, so I won't list them again. I only note the important proviso that this may be quite a bit less in total than you think. Social Security on average pays retired workers $1300 a month. It was designed to avoid an all-too-common occurrence of simple starvation, rampant homelessness, and abject poverty among a large number of elderly. No guarantee is made that you won't have to leave your home, move away from your friends and family if you live in an expensive part of the country, etc. Some people get a bit more, some people get quite a bit less. And the loss of family and friend networks - especially to such at-risk groups - can be incredibly damaging. Note also that those financially desperate will be generally pushed to take retirement at the minimum age, even though benefits would be larger and more livable if they delayed their retirement. This is an additional cost of not having other sources of savings, which is not considered by many. Well, yes, many cannot retire whether they want to or not.  I cannot find statistics on this specifically, but many are indeed just unable to financially retire without considerable loss. Social Security and other government plans help avoid the most desperate scenarios, but so many aspects of aging is not covered by insurance or affordable on the limited income that aging can be a cruel and lonely process for those with no other financial means. Those with no savings are not likely to be able to afford to regularly visit children and grandchildren, give gifts on holidays, go on cruises, enjoy the best assistive care, or afford new technological devices to assist their aging (especially those too new and experimental to be covered by the insurance plans they have).  What's worse - but most people do not plan for either - is that diminished mental and physical capacity can render many people unable to navigate the system successfully. As we've seen here, many questions are from adult children trying to help their elderly parents in retirement, and include aging parents who do not understand their own access to social security, medicaid/medicare, assistive resources, or community help organizations.  What happens to those aging without children or younger friend networks to step in and help? Well, we don't really have a replacement for that. I am not aware of any research that quantifies just how many in the US don't take advantage of the resources they are fully qualified to make use of and enjoy, due to a lack of education, social issues (feeling embarrassed and afraid), or inability to organize and communicate effectively. A resource being available is not very much help for those who don't have enough supportive resources to make use of it - which is very hard to effectively plan for, yet is exceedingly common. Without one's own independent resources, the natural aging and end of life process can be especially harsh. Elderly who are economically and food insecure experience far heightened incidence of depression, asthma, heart attack, and heart failure, and a host of other maladies. They are at greater risk for elder-abuse, accidental death, life-quality threatening conditions developing or worsening, and more. Scare-tactics aren't always persuasive, and they do little to improve the lives of many because the people who need to know it most generally just don't believe it. But my hope here is that the rather highly educated and sophisticated audience here will see a little more of the harsher world that their own good decisions, good fortune, culture, and position in society shields them from experiencing. There is a downside to good outcomes, which is that it can cause us to be blind to just how extremely different is the experience of others. Not all experience such terrible outcomes - but many hundreds of thousands in the US alone - do, and sometimes worse. It is not helpful to be unrealistic about this: life is not inherently kind. However, none of this suggests that being co-dependent or giving up your own financial well-being is necessary or advised to help others. Share your budgeting strategies, your plans for the future, your gentle concerns, and give of your time and resources as generously as you can - within your own set budgets and ensuring your own financial well-being. And most of all - do not so easily give up on your family and friends, and count them as life-long hopeless ne'er-do-wells. Let's all strive to be good, kind, honest, and offer non-judgmental support and advice to the best of our ability to the people we care about. It is ultimately their choice - restricted by their own experiences and abilities - but need not be fate. People regularly disappoint, but sometimes they surprise and delight. Take care of yourself, and give others the best chance you can, too." The limits on an HSA are low enough that there's no real danger of overfunding it.  The limits max out at (as of 2011, for an individual) at just over $3000 per year.   Sometime in the next few years, you will have more than $3000 in health care expenses.  It might be something like a car accident, acid reflux, a weird mole that the doctor wants to check out, a broken toe, a few nasty cavities that need to be filled, an expensive antibiotic, or something else entirely.  Or, it might be something less dramatic, getting eaten away by copays and contact lenses. When that happens, you want the peace of mind that you can pay for your deductible plus any other expenses.  Keep in mind that even a $5000 deductible can cost you more than $5000 out-of-pocket; either because of non-insured expenses, or simply an illness that straddles multiple calendar years. Besides, it's not like your HSA money is going anywhere; even if you never touch it, it's just a savings account that you can't touch until you turn 65.  And if you do truly have an emergency, you can get at it if you have to. Even if your HSA is filled with several years' worth of deductibles, it's still a way to shield thousands of dollars a year from taxes, with luck moving them into lower-tax years 40 years from now.  And it's a way that doesn't involve income limits or mandatory withdrawals. Pre tax insurance is not possible unless the emplyer provides hsa and do a payroll deduction. Obamacare is all post tax and you can do deduction if your expenses exceeds 10%of your income "Two typical responses to articles/surveys making such claims:  **1. People use other forms of asset for emergency savings because interest rates are low - clearly false.**  **2. People use other forms of saving than a saving account therefore such surveys as the X% can't handle a $500 emergency are wrong on their face - this is false the vast majority use a savings account.**  I've chosen a topic that absolutely annoys the shit out of me every time it comes up, how people save their money. Every time this topic comes up about X% of americans can't come up with $Y dollars in an emergency or have less than $Z in savings someone inevitably chimes in with the linked response. I have *never* seen anyone attempt to source their hand waving response beyond their own anecdote, which is usually a thinly veiled brag about how financially savvy they are with their wealth. Perhaps people who have no assets, or crippling debt don't go out of their way to brag about it...  I could link multiple reddit posts making a similar response, which I address with my own stock response about once every 1-2 months. Instead I've decided to expand with data from several other sources. This is the prototypical good/bad research problem. If you're asserting something, but qualify your statement with, ""I""m sure we'd find...if we looked into..."" then you're doing it wrong. A good researcher or journalist doesn't put bullshit like that in their work because it's their job to actually look for sources of data; data which should exist with multiple government and independent groups. So let's get started (all data as recent as I could find, oldest source is for 2010):  * [Most americans don't invest in the stock market](https://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf)  About 48.8% of americans owned publicly traded stock directly or indirectly, with a much smaller percent (13.8%) owning stock directly -  pages 18 and 16 respectively. It's important to note the predominance of indirect ownership which suggests this is mostly retirement accounts. It's entirely possible people are irresponsible with their emergency savings, but I think it safe to say we should not expect people to *dip into their retirement accounts* for relatively minor emergency expenses. The reason is obvious, even if it covers the expense they now have to make up the shortfall for their retirement savings. This is further supported by the same source:  &gt;""The value of assets held within IRAs and DC plans are among the most significant compo-nents of many families’ balance sheets and are a significant determinant of their future retirement security.""  Ibid (page 20, PDF page 20 of 41)  There is also a break down of holdings by asset type on page 16, PDF page 16 of 41.  * [This data is skewed by the top 10% who keep more of their wealth in different asset types.](http://www2.ucsc.edu/whorulesamerica/power/wealth.html) For a breakdown between the 1st, 10th, and 90th percentiles see **table 3.**  So far it seems pretty hard to maintain a large percent of americans have their wealth stored outside of savings accounts, mattresses aside.  * [Here's my original reply as to the breakdown of americans assets by type and percent holding.](https://imgur.com/a/DsLxB) Note this assumes people *have* assets. [Source for images/data.](https://www.census.gov/people/wealth/data/dtables.html)  Most people use savings accounts, with runner up falling to checking accounts. This will segue into our next topic which is the problem of unbanked/underbanked households.  * [A large number of individuals have no assets; breaking down by asset types assumes people *have* assets in the first place.](https://www.fdic.gov/householdsurvey/)  To quote the FDIC:  &gt;*""Estimates from the 2015 survey indicate that 7.0 percent of households in the United States were unbanked in 2015. This proportion represents approximately 9.0 million households. An additional 19.9 percent of U.S. households (24.5 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system.""*  That's right there are millions of households *so finance savvy* they don't even have bank accounts! Obviously it's because of low interest rates. Also, most people have a checking account as well as savings account, the percent with ""checking and savings"" was 75.8% while those with ""checking only"" were 22.2% (page 25, PDF page 31 of 88). It's possible in some surveys people keep all their money in checking, but given other data sources, and the original claim this fails to hold up. If the concern was interest rates it makes no sense to keep money in checking which seldom pays interest.  This survey also directly addresses the issue of ""emergency savings"":  &gt; *""Overall, 56.3 percent of households saved for unexpected  expenses or emergencies in the past 12 months.""* (page 37, PDF page 43 of 88)  Furthermore:  &gt;*""Figure 7.2 shows that among all households that saved for  unexpected expenses or emergencies, savings accounts  were the most used savings method followed by checking  accounts:* **more than four in five (84.9 percent) kept savings  in one of these accounts.** *About one in ten (10.5 percent)  households that saved maintained savings in the home, or  with family or friends.""*   Emphasis added.  * [Why don't people have wealth in different asset classes? Well they don't save money.](http://cdn.financialsamurai.com/wp-content/uploads/2014/06/savings-rates-by-wealth-class.png)  This is further supported by the OECD data:  * [Americans ""currency and deposits"" are 13% vs 5.8% for ""securities and other shares"" as % of total financial assets.](https://data.oecd.org/hha/household-financial-assets.htm)  Additionally:  * [Interest earning checking accounts: 44.6% of american households (second image)](https://imgur.com/a/DsLxB)  * [""Among all households that saved for unexpected expenses or emergencies, savings accounts were the most used  savings method followed by checking accounts..."" (page 7, PDF page 13 of 88)](https://www.fdic.gov/householdsurvey/2015/2015report.pdf)  * ~70% saved for an emergency with a savings account vs ~24% who used checking. *Ibid.*  In fairness the FDIC link does state *banked* americans were more likely to hold checking accounts than savings accounts (98% vs ~77% respectively) but that doesn't mean they're earning interest in their checking account. It's also worth noting median transaction account value was for 2013 (this is the federal reserve data) $4100." "You don't mention what kind of insurance you're talking about, but I'll just address one angle on the question. For some kinds of insurance, such as health insurance (in the US), auto insurance, and homeowner's insurance, you may be insuring against an event that you would not be able to pay for without the insurance.  For instance, if you are at fault in a car accident and injure someone, they could sue you for $100,000.  A lot of people don't have $100,000.  So it's not even a matter of ""I'll take the risk of having to pay it when the time comes""; if the time comes, you could lose virtually everything you own and still have to pay more from future earnings.  You're not just paying $X to offset a potential loss of $Y; you're paying $X to offset a potential derailment of your entire life.  It is plausible that you could assign a reasonable monetary value to that potential ""cost"" that would mean you actually come out ahead in the insurance equation. It is with smaller expenses (such as insuring a new cellphone against breakage) that insurance becomes harder to justify.  When the potential nonfinancial ""collateral damage"" of a bad event are less, you must justify the insurance expenses on the financial consequences only, which, as you say, is often difficult." I would suggest that you use Emergency Funds for things that have a Low likelihood of happening but if they do happen can be devastating. I used to work as a financial advisor and the sugfestion we gave people is to have about 3 months worth of expenses in cash. This was primarily to cover things luke loss of work or some unforseen even that would prevent you from missing work for an extended period of time. Once you have your emergency fund saved do not touch it! Leave it where it is. Then tou can start working on a savings account for those items that are more likely to happen but dont have as much of a negative impact.