Advice in Allocating Savings

1. Emergency Fund:

Standard Advice: Keep 3–6 months of living expenses in a highly liquid and safe account, like a savings account or money market account.
Why? This provides a safety net for unexpected expenses like medical bills, car repairs, or job loss.
- Single with no dependents? You might lean toward 3 months.
- High job security or live with family? You could go lower.
- Variable income or supporting others? Aim for 6 months or more.

2. Current Allocation:

Savings: $30k
ETFs: $80k
Total Net Worth (NW): $110k

If your monthly expenses are $2,500, a 6-month emergency fund would be $15,000. This means you currently have $15k extra in your savings that could be invested.

3. Where to Put the Extra Money?

Investing in ETFs:
- Once your emergency fund is secured, it's generally better to invest the rest for long-term growth, as savings accounts have lower returns than ETFs.
- ETFs are great for building wealth, but only if you can leave the money invested for 5–10+ years (to weather market fluctuations).
High-Yield Savings Accounts (HYSA):
- If you’re saving for shorter-term goals (e.g., a car, house down payment, or travel), consider a HYSA, which provides higher interest rates while keeping your money accessible.

4. Contributions Going Forward:

Savings Account Contributions:
- After reaching your emergency fund goal, reduce or stop adding to savings. Instead, funnel that money into investments.
ETF Contributions:
- Automate regular investments in ETFs. Dollar-cost averaging smooths out market fluctuations over time.

5. Adjust for Personal Goals:

Are you planning to buy a house or make a large purchase soon?
- Keep the money for that goal in a safer place, like savings or short-term bonds.
Are you comfortable with risk?
- If you’re OK with market volatility, investing your extra savings now can potentially lead to higher returns.

Example Breakdown for Your Situation:

Emergency Fund: $15,000 (6 months of $2,500/month expenses)
Savings (Short-Term Goals): $5,000 (if needed)
Invest in ETFs: $90,000 (includes the $15k surplus from savings + your current ETF balance)

Bottom Line:

Keep enough for emergencies and short-term goals in savings.
Invest the rest in ETFs or other growth-oriented assets, especially if your time horizon is long (10+ years). This balance ensures you’re prepared for the unexpected while still building long-term wealth.