A $3,000 Question of the Day

What would you do with an extra $3K? Money Mom has a few ideas.

What would you do with an unexpected, extra $3,000? NYMag’s new feature “Money Mom” takes a crack at this question, and I’m totally on board with the answer:

I Inherited $3,000. What Should I Do With It?

Take $2,000 from your aunt’s check and park it in a savings account, where those dollars must sit on their little cash butts, entirely liquid. You’re not allowed to even breathe on them unless an expense checks all of these boxes: (a) It’s a surprise, (b) It’s very, very important, AND most essentially (c) It’s so important that if you couldn’t afford it, you’d put it on a credit card and go into debt.

And if you do dip into it, replenish the $2,000 as fast as you possibly can. This is a financial ground rule.

Money Mom, aka Charlotte Cowles, wants this letter writer to get an emergency fund set up as quickly as possible, before she even thinks about other spending opportunities like replacing her 10-year-old car.

But Money Mom knows that e-funds aren’t e-z. (SORRY COULDN’T RESIST.) Here’s my favorite part of her advice:

Realistically, that amount of savings will take years to squirrel away, and that’s okay. “Unless you’re making a bajillion dollars, it’s going to take you a really long time to save up that three to six months’ of expenses. The starter $2,000 should be the initial goal, and then continue adding from there,” says [financial expert Manisha Thakor].

It took me sixteen months to save my three-month emergency fund, in part because I had to draw from that fund a few times during the process (which is kind of the point, but still).

Whenever I think about that kind of math, it feels like it’s going to take forever to save for anything else, like the Roth IRA I want to fund this year or a future down payment. (Getting my last bit of outstanding debt fully paid off, which should happen in October, will help accelerate the savings process.) But I’m going to keep saving, because I agree with Money Mom’s advice: get your emergency fund sorted, start putting something towards retirement, and then decide whether you want to spend the money left over.

Do you agree with Money Mom? What would you do with an extra $3,000?

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