Normally the hubby and I have an emergency fund. Money set aside for those big quick expenses like replacing a leaking roof or a broke down car (we just purchased a new to us vehicle).
But does setting aside a chunk of money in a money market or interest account make sense when borrowing rates are still so low and there are better returns out there?
I’ve started to wonder. The hubby and I already have a small HELOC that we use for investing purposes. The current interest rate on that is about 6% and our average rate of return is about 12% so scooping the difference is pushing our net worth higher.
So why wouldn’t a HELOC for spending (which I believe the bank really intends it to be for) be the same?
There are only two issues. One is any prepayment penalties, the other is if the HELOC is closed to further drawdowns later on (which means that when the emergency actually happens, knock on wood it doesn’t, the HELOC won’t be available).
‘Course it is not like we’ll actually be spending the money we would have put in the interest bearing account. That money will be placed in investments. Worst case, we lose money by pulling the funds out of the investments early. Hhhmmm…