Having a solid emergency fund is actually pretty wise. Maybe split some of that into something low risk like I-bonds. My wife has similar anxiety, and it took years of financial education to get her comfortable with the idea that we only need a month of backup, and can float the rest on CC until we liquidate other assets.
As someone who went through two recessions, survived multiple layoffs, and had a few medical things, this seems like crazy talk. The general rule of thumb is 6 months of savings. I've known many that didn't follow this rule, and ended up in very bad debt.
Do you need it all sitting in a savings account, though? Inflation ate almost 9% of its value this past year. Granted stocks are down 20% this year, but assuming you don't have to touch it for a while, they should more than recover in a few years (well, assuming no massive global disaster, which seem more and more common lately).
We have a decent amount sitting in our savings account, but not six months worth. But I can liquidate assets to get us the rest of that six months if necessary, and it would take about a week to get that into our bank account.
If you need six months of expenses, you likely got laid off, which means your stocks are likely tanking as well, and it takes longer to get a new job. A cash or bonds emergency fund is perfectly logical. Six months isn't even that much money; in a normal 2% inflation year, that means you're losing less than 0.01% of the amount each month to inflation. The peace of mind is worth that, isn't it?
Personally I have 2 years in cash because I like to take 6+ month sabbaticals between jobs, but even that is a negligible amount due to my expense/income ratio.
This year. Meanwhile it would have missed out on 27% in gains the previous year (and its associated dividends), if I kept it in a bank account.
Also that 20% loss will most likely recover in time. Inflation almost never reverses itself, it only slows down.
There's a reason rich people park most of their money in assets, and not in savings accounts. If they got more returns by keeping it in savings accounts, they would do that.
6 months of basic living expenses isn't "most of their money" for rich people. Ideally it wouldn't be for the rest of us either.
You seem to be thinking I'm against investing altogether - I'm not, but there is a significant risk avoidance in having an emergency fund that is 100% liquid and not tied to market risks.
But you will be liquidating your assets at the worst possible time (assuming the cause for needing to dip into your emergency fund is more systematic than being individually fired and not being able to find another job).
A cautionary tale for you - I burned through 8 months of savings in the 2008 crisis. While the I-Bond isn't subject to market fluctuations, I am glad that my emergency fund was in cash/CDs and not invested. Because it would have lost 40% of it's value just when I needed it the most.
