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A "vacation bank" and savings

Chris Farrell Apr 20, 2011

Question: Sorry to bother you, but since I started listening to your podcast (Thank you!) I have become focused on having a decent Emergency fund.

I am married with 2 kids, have a job I love that pays well, and we have our own home. We comfortably put money in savings every month but I am wondering if I have a “hidden” emergency fund.

I rarely take time off of work (again, love my job) so I have 450 hours of leave in my “bank”. The max carry over is 440.

I can cash out 40 hours per year, but there is a clause allowing larger withdrawals in emergencies. I will receive the full balance if I leave my job. Can I consider the money this leave represents as part of an emergency fund? Thanks, Brian, Anchorage, AK

Answer: You’re not bothering us at all. We love questions. And it’s great to read that you’re saving every month.

My answer to your question is yes… maybe… and no. Here’s why:

Yes: You can consider your vacation “bank” part of your overall cash cushion. It has real value and I imagine your hours add up to a nice chunk of money.

Maybe: Your employer can always change its vacation policy. Companies have a lot of freedom to overhaul their approach to vacations, although most try to steer clear of too draconian a cutback to avoid hammering employee morale. Still, the risk to your “bank” acount is a rule shift that may be less generous than the current policy.

No: The message in your flush vacation bank is that you aren’t taking enough time off from work.

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