No. of Recommendations: 2
1> My assumption is that I am unlikely to need this money.

Well, duh, that's why its an emergency fund. Personally, I found many of your responses to be completely silly. Having a HELOC as an emergency fund is a bad idea. Banks can cut off the HELOC without notice (banks have already started closing HELOCs in high-risk markets such as CA). In the event you DO have an emergency (say, out of country medical issues, or medical issues in general, sudden death in the family, catastrophic uninsured asset damage, etc), you will need something probably like 72 hours to liquidity. Money Market funds, 3rd tier cash reserve mutual funds, CDs, savings account, etc. That 1% you might miss out on returns with cash-like assets would be a godsend knowing the money is available to write a check on, or even wire. HELOC as an emergency fund is up to the bank, and can be closed with little notice. You *need* that money available to you, or else its useless as an emergency fund.

>I think it's a better solution than having to pay penalties on CDs or taking money out of investments when you really don't want to.

You're acting like you wouldn't pay a penalty if you exercised the money in a HELOC. You're interest rate would be much much larger than a CD penalty, and also you'd now have an additional expense, shrinking the time that the money buys you until the emergency subsides. Not to mention, aren't there fees and costs associated with lining up a HELOC? The bankers won't do it for free, will they?

>That's not enough available resources for my comfort level / lifestyle.

Ok, well, you need to adjust the number to whatever your income and expenses are. $20K is six months worth of non-saving expenses for me. That means that if I lose my job, or my income goes to zero, 20K will last me six months of my mortgage, my food, etc. That's assuming at that time that I cut nonessential spending.

Personally, based on the limited info provided, you sound highly-leveraged. And that's fine, but if you want an emergency fund to mitigate risk, then you seem to want the benefits of the emergency fund (less risk) by using leverage (more risk). Doesn't really put you in a better position, IMHO
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