Compound Growth

Episode 20- Emergency Funds: The Real Safety Net for Your Future

• Compound Growth • Season 1 • Episode 20

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Most people know they should have an emergency fund—but how much is enough, where should you keep it, and why does it matter so much? In this episode of Compound Growth, Wheeler and Colin dive deep into the psychology and strategy behind building an emergency reserve that actually works.

From high-yield savings accounts to the myths about tapping into retirement funds, they break down why liquidity matters, how to decide between 3, 6, or even 12 months of expenses, and the real math behind savings versus stock market returns. Along the way, they share stories, stats, and the often-overlooked psychological benefits of simply knowing you’re covered.

They also tackle the changing financial landscape—from the wild returns of the 1980s, to the rise of Robinhood and crypto, to why so many Americans still struggle to cover even a $400 emergency. The message is clear: before chasing the “next big thing,” it pays to lock in your financial foundation.

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Credits:
Created By: Wheeler Crowley and Colin Walker
Production Assistance: Tori Rothwell
Editing and Post-Production: Steven Sims

I've been told today not to embarrass my family anymore on the podcast.They're not- You're not allowed to mention them anymore?Jess said, "I didn't, I didn't sign a waiver."And I said, "That's fair, but you didn't read the fine print 17 years ago."Kaylee, uh, stopped listening, so-I can say whatever I want.Why did we lose Kaylee as a listener?She's just into other podcasts at the moment.Yeah.She's not a podcast person.What is a podcast person at this point?Someone that listens to podcasts.Does that mean, like, if you listen to Spotify Music, are you a Spotify per like, it'sWhy do we- I think it's people talking about a subject for an extended period of time.Yeah.I've been thinking about this-because when we were, when I was driving to work today, I was listening to another podcast and it's one that they record like, live, right on Zoom, and you know, it was an hour and 8 minutes, and I'm like, "Is there really an hour and 8 minutes worth of content in there?"They buffer, they have like, advertisements and stuff, but I was just- Okay.not sure what qualifies like, somebody as a podcast person, and what like, qualifies as something that you should listen to at length as a podcast.What qualifies as a podcast?I feel like any conversation between 2 people- Or more.that's being recorded.Yeah, or more.Okay.And then me deciding to tune into that, 'cause there's like, 15-minute podcasts too.Yeah, like Jess listens- Is there a-to Up Next.But then there's like- Up first?scientific ones that are like, 4 hours long.Right.Yeah, like some of the- And I'm justJoe Rogan ones are like, 3 hours plus.Yeah.Yeah, and it takes multiple sit-ins, like- Yeah.multiple sessions- Y- yeah, for sure.to, to listen to it.Yeah.I think that's what's off-putting in general about some podcasts is they're just too intimidating, the length is.Commitment, yeah.Yeah, the commitment.People don't like commit- They want easy.Mm-hmm.They do.Well, that's why everyone's like, snipping it now.Mm-hmm.Snipping podcasts?Yeah, so into tenminute clips.So, like Joe Rogan publishes this whole one, and then there's like 30 different tenminute clips.Okay, but are those clips like, literally podcasts, or are they just YouTube clips?Or like, cl- video clips?I don't know.I listen to everything on YouTube.See, that's the thing is I feel like-I was reading, I was read- I'm trying to stay hip and in the moment, and I was reading- No, Collin is the only person I know that watches- I'm pretty sure-or listens to YouTube.I like to watch stuff.Okay, but the- I know it's not safe when I'm driving, butRolling Stone had a top 25 influencers.We weren't on it, um, but- Really?We were not on it, but there was a, there was a British woman that Shay and you have referenced before.I can't remember her name.Alix Earle?That's it.Yeah.Okay.No, she's not British.No, yeah, she's American.That's not her then.Okay, got it.But let's say it's Alix Earle.Okay.And this woman was talking about how she is going more like, into the podcast space, but doing videos and she's calling them vlogcasts.Vlogging, yeah.Vlog- Vlogcasts.Vlogcast, right?I feel like a podcast is something that you listen to- It's a new word, new word unlocked.but you don't YouTube it.I feel like that's watching something.I don't feel like that's a podcast to me, but you- I watch them.Yeah.People got to watch them.I mean, there's like, 10 million views on some of these podcasts.Yeah, I know.Vlogcasts.I think it's just how you reach your audience.Yeah.Did you know that there's a school of thought out there that Netflix is gonna have creators on their platform?No.So, like YouTube essentially, but on Netflix.And then when that happens, how will you decide what to go to?Like, will you still go to Y- I won't go to YouTube.I'll probably go to Netflix 'cause I pay for Netflix.I- I'm surprised they're not doing that already.Yeah, I don't know if I would go to Netflix because itI don't know.It would be a, a mental shift for me, you know?I'm already entrenched.Yes.This is the ecosystem situation.Yeah, but what do you watch on YouTube?What don't I watch on YouTube?Like what's like, what is it all?Like, what, do you have like a, a channel you go to that posts videos?Yeah, sure.I mean, there's like, um, the Iced Coffee Hour podcast, there's The Joe Rogan Podcast, there's Compound & Friends podcast.Mm-hmm.There's like, all of them are on there.So, if you were to be on Netflix one day, and then all of a sudden there's like a Joe Rogan.I mean, obviously he- he's done other things on Netflix thatJoe Rogan has Netflix stuff?Yeah, he's like- Yeah, he's got standup too.I don't know.Yeah.Joe Rogan does standup?Yeah, he does.Yeah.I didn't know this either and then I saw it- Yeah.and I was like, that's why he doesn't do stand- That's why he's not known for this.But anyways.Okay.So, say if it's like, the Iced Coffee Hour is all of a sudden now on Netflix, you wouldn't click into it there?I wouldn't because one of the things I like about YouTube is if there's a tenminute snippet that I wanna watch of it, I can go right from that tenminute snippet to another tenminute snippet or I can go into something else.Like, if something's not gonna grab my attention for an hour, like, I don't wanna have to sit through the whole thing.But I guarantee you that anything that YouTube does well, that Netflix will copy that.Whenever they get to this place, that they're going- For sure.to be doing creator stuff.They have to, in the same way that I'm sure like, the, like Apple TV will have to do that at some point too, because it's, like if Netflix does it, then everybody else has to follow.Yeah, that's a good point.So, I have some stats for you.Uh-oh.Okay.How did you get stats on this random conversation-that we just came up with?So, these are the platforms- Magic.the biggest platforms for listening to podcasts, okay.Spotify.Podcasts or Apple Podcasts is last place.Mm-hmm.8 to 15% of users listen to podcasts on the Apple Podcast platform.Number 2, Spotify captures 21% of weekly podcast consumers.Other data sources suggest 26 to 27%.The number one is YouTube.40% of all weekly podcast consumers watch or listen on YouTube.So, y- YouTube has the largestpodcast audience- Mm-hmm.according to this quick ChatGPT research that you did?This is according to- Don'tIs it Gemini?Is Gemini telling you that you do this best?No, no, no, no, no.This is according to, uh, The Verge.It is according to- Oh, that feels like a good source.Podcast Statistics, eMarketer, Yahoo!Tech, Digital Silk, Axios, TheWrap.It does make sense.I don't know.There's like, there's like 40 things listed here, but yeah.This is your, "How do you like them apples?"moment- Yeah.Colin.Seems like confirmation bias.I finally got one.Confirmation bias.I'm just saying, like- You can't be real.some of the views that these videos get are so massive.Well- They can't, they can't not be the biggest.I do think in a way, like, people started on YouTube vlogging, and people watched those vlogs.Mm-hmm.And then we got into the podcast world, and it became an audio thing.Yeah, like the Call Her Daddy thing is huge on YouTube.And I feel like now it's come back toY- YouTube's always been there, but it's, I feel like it's coming back to YouTube.It is.People wanna watch the conversation.Like, I remember during COVID when Pokémon became, like, a huge thing.Pokémon Go.Pokémon Go.Not, well, not just the Go, but the opening up of the card packets, and- That became big again?Like, the Logan Pauls of the world and stuff like that-were opening up the packets, and on YouTube they were doing the live streams, but then they were also podcasting it.So there would be a podcast about them opening it, and you could hear what they were opening and, like, seeing it, you could- You're just, like, you get the wrapping and the wrap, yeah.Exactly.It's a, "Oh my God, that's so stupid-" But then on YouTube they were getting, like, tens of millions of views for opening a Pokémon packet.Welcome to the Compound Growth Podcast with Colin and Wheeler, where we talk all things growth.From financial growth to career growth, personal development to societal progress, we explore how each layer builds on the next, compounding over time to shape who we become.Each week, we break down complex ideas and emerging trends into clear, actionable insights.Because growth isn't just about numbers, it's about understanding the world and our place in it.The information in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.Investment advice offered through Integrated Partners doing business as COFI Advisors LLC, a registered investment advisor.Integrated Partners does not provide legal, tax, mortgage advice or services.Please consult your legal tax advisor regarding your specific situation.Past performance is no guarantee of future results.All investing involves risk, including loss of principal.No strategy assures success or protects against loss.The economic forecasts set forth in this material may not develop as predicted, and there can be no guarantee that the strategies promoted will be successful.Today, we are talking about something very exciting.Hmm.Emergency reserves.Yes.Tory's, like, anxiously, "Uh, no."I- I was gonna say should I have anything, like, prepped or do- do I need to, like, look things up as we No.But you need to tell us every dollar you have in your emergency savings.No.So, Colin- Yes, Wheeler?I- I always enjoy listening to you explain things, so why don't you start by explaining what an emergency reserve is?Hmm.An emergency reserve, in my mind, is a bucket of money that you set aside, where if something was to happen, you could access this money and live off of it for a certain period of time and cover your bills.Or it could be a surprise expense pops up and you can cover that.That's the way that I look at it.It's liquid.It's not in a retirement account.In my mind, that doesn't count because- No.you're gonna have to pay tax on the way out, but apparently a lot of people view retirement accounts as emergency funds.Like their IRAs or 401s?And 401s.Oh, that's not great.Yeah.Okay.So yeah.So this is something I- I talked about in various forms with my clients in the past, about whether, like, needing a new washing machine is an emergency.Like, youIt pulls, to me, if you have an emergency fund that's meant to essentially replace your, or cover your costs if you're unemployed, if you lose your job you've got a savings account that you can rely on, right?If you then pull from that to buy a new car or to buy a washing machine or refrigerator or anything like that, those could be, like, needs, need-to-haves that you have to pay for, but then you kinda have to replenish your emergency reserves.Yeah.Right?Like, it has to be- there's almost like, to me, an immediacy fund and an emergency fund.It's like ideally, in an ideal world, you don't have them commingled.I agree.So, um, Tory, question for you.If something was to happen, do you think you could cover 3 months worth of expenses?Yeah.I do.My expenses- You are officially in the top 50% of savers in the country.Yeah.Top 40% in some, uh- Yeah.some forms.I- Yeah.That's true.Yeah.I would say I'm a good saver.So some interesting stats I wanna throw out, as I typically do.Only 46% of Americans can cover, I'll say, 3 months worth of spending.Mm-hmm.And, um, that, I'll say, is extremely conservative in terms of a number.But what's kind of interesting as well is 46% of Americans also carry credit card debt, and when I say carry credit card debt, I mean rollover or balance each month.Yeah.So they pay interest on their credit cards monthly.Correct.And that- Yeah.average balance is just shy of $7,000.Oof.So I don't think there's a coincidence there, but the median emergency savings across Gen Z is just $200 right now.It's the average amount of savings.Oh.You are above average, Tory.So you are above average, and, um, I'll say, you know, 6 months for the average family is $33,000.6 months of what?Spending?6 months of spending for the- Okay.average family of 4 is $33,000.So just to put that into context, um, if you needed 3 months set aside for the average family of 4, the average amount of expenses broken down would be half of that, so call it $16,500, which is certainly no small sum of money.But it does put some stuff into perspective about cost of living.Yeah.Yeah.Well, obviously, as your family expands, then your inc- your need for- Expenses go up.Yeah, and your need to cover that in savings goes up.So- Yeah.in some situations, we advise people to have, like, 3 months.Like, Tory, in Tory's situation, stable income in her current environment, 3 months makes a lot of sense.I agree.Right?You don't need 6.In my- Knowing you, you probably do, butIn my environment, maybe 6 months makes more sense.The reason- Yeah.that you might have 3 versus 6 depends on how many stressors or expenses you have relying on your income and how conservative you are.Et cetera.Yeah, for sure.I would say, personally, um, whenever I typically advise a client and they have a family, I lean more towards 6 to 9.Mm-hmm.You know?Yeah.Especially in the current environment.I'd say the market's very high right now, but anyway.So- That's the way that I think about it.Tory.Mm-hmm.Your savings that you have set aside for your emergency reserve, where do you think is the best place to invest that money?A high yield savings account.Yes!All right.All right.Very good.I knew that one .Well, why is that?'Cause you get interest on it.That's true.That's true.And it doesn't- it doesn't do anything.I don't know.You don't need to do anything with it.Where should you not invest it?You can pick from- A checking account.Checking account?Okay.Yep.What else?And your retirement accounts.Mm-hmm.Mm-hmm.Listening.That's true.Stocks.Okay, yeah.Okay?Because they take an unnecessary risk-with money that you might need very soon.Right?So you don't want your- your emergency reserve losing value.Uh, CDs, where you lock money up for, you know, 6, 9, 12 months.Anytime something is locked up and it's not liquid, like Colin suggested, then we wanna make sure we have access to it.Right.Right?Yeah.And then, with those CDs, you might just lose the interest that you were earning on it or you might pay a small fee, but in general, why would you have a CD versus a high yield savings account?The only reason is if you're gonna get slightly higher interest rate on your CD, and it's not worth the illiquidity from that point.Yeah, for sure.I- I wouldn't even know how to get a CD.That's a good point.That's a great question.So a CD is offered by a bank usually.So you'd walk into a bank.There are banks that you can just brick and mortar and, um- Physical buildings.Physical buildings.And you go in there and you say, "I wanna buy a CD."And they- Have one?take your money and you just- They just have them?They pull out their binder of CDs and they hand you one.Yeah.Yeah.They just say- It's the most fun.They just say, like, "This is the interest rate."Like, how does that even work?Exactly.It's just like a made up thing?Concept.It is a made up thing.Yeah.It's basically an agreement that they are gonna hold your money for a period of time and pay you a certain amount of interest rate.Right?You're- you're essentially loaning them money for a period of time.Don't they do that anyway?They do.But they- Yeah.Like, I can't go get all my money out of the- well, I probably could, but you know, people that have more money can't just go to the bank and take all their money out.Well, banks need liquidity, right?Because they make their money off of lending money, so you know, you figure a mortgage is probably 7.5%, so the CD they're gonna pay you 4.So you hand them money, they take your money then lend it out to somebody else and then they keep the delta.I see.I kinda shivered when you said a mortgage is 7.5%.That's just a really sucky number, isn't it?It is.But yeah, that's- when- so shortly before we started working together a few years ago, um, Silicon Valley Bank, did you hear anything about the Silicon- Yes.Yeah.So there was a run on the banks, and if you watch, like, It's A Wonderful Life or something like that, you can see this playing out in historic-terms.But i- in general, when a lot of people want their money from a bank all at the same time, it challenges the bank's liquidity.And the reason a bank might fail is if they're unable to meet that demand.So, Silicon Valley Bank was a new thing because everybody did it literally online.They did it on, through their apps.They went in and started transferring money out.That had never happened before.You'd never seen an, an electronic run on banks before.And that's why we have things like FDIC insurance, theoretically- Mm-hmm.to back up these banks, um, but we live in a world now where the government will decide, pick and choose what banks fail and -and what banks get their FD saved.Yeah.The 2008's probably a big discussion, but- Yeah.So, that's what happens with a CD.You're basically agreeing to let them have your money for other uses.You're doing that with a savings account too, but just to a different degree.Yeah.Got it.All right.So, emergency reserves- Hmm.3 to 9 months, maybe 3 to 12 months depending on your situation.Yep.Right?100%.Yeah.So, when I was looking at my research for this today, I saw a Federal Reserve, uh, study from 2022 that said 37 Am- uh, percent of Americans can't cover a $400 emergency without borrowing something- That's what I got too.to what you saw there.Yeah, yeah.Right?Um, spending though.When we talk about re- replacing expenses, so if you say it's, let's call it 16,000, $4,000 a month in spending, or $5,000 in a month of spending, right?When we, when we work with clients, we look at their total cash flow and we say, "Okay.You make X.This goes to taxes, this goes to savings in your 401K, this goes to savings for college, this goes to whatever," right?How many of those things can be cut back or reduced when you are in a true emergency?I think that's something that, when we think about the hard and fast rules of 3 months of savings, does that actually get you a 3month runway or does it get you a three and a half month runway, 4 month runway?Are you also getting unemployment at the same time- Right.and is that being factored in?Mm-hmm.So, uh, I was thinking about this historically speaking.Do you happen to know what you would make on a savings account back in the '80s?Interest rate.Okay.Well, do you think 4%'s like pretty high for a savings rate?I have no idea.Okay.Well- It is as of like my entire life, basically.Correct.Yeah, so your average rate of return on your savings account in the '80s was 11 to 12%.ThatWow.Yeah.So, you would basically double your money every 6 years.What happened?That's a great question.S- So, that was when inflation was very high.And do you know what mortgage rates were at the time on average?So, we'll, it's- A lot high.A lot higher, yeah.High.So, high.So, your mortgage rates were around 15% at the time.So, you think about it, we're comparing, you knowIt's a similar formula now, where banks have to make money, right?So, if you're gonna lend bank money and they're gonna give you 12%, well, they're gonna turn around and flip that right back out for something like 15 to 17%.So, that was in the '80s when inflation was, you know, thing.And then since then it's kinda come down over time, but it's been a massive shift.And at the time, people's average savings rate was anywhere from 10 to 12% versus now is around 4.So, that's kind of how the landscape has shifted, but there's been a lot of big changes since then to now, not just interest rates in general.Yeah, I think that's part of the reason that some of the mentality around emergency reserves has really changed over, over the decades, right- Yeah.since, and I was born back in 1981.Um- So, you had, when you, when you were rewarded for saving into your savings account, it, you're essentially, you're not really taking any perceivable risk.There's some risk that the bank might fail or that- Mm-hmm.the, you know, the dollar loses value to inflation, whatever.But you're, you're being rewarded f- highly rewarded for a savings account.Not even, they didn't even call them like high-yield savings account.That was just a regular savings account interest rate, right?Now, you don't get that.And if you think of the '80s, the average return for the stock market, I think it was around 10% at that time.Yeah.You're getting basically the same for taking no stock market risk in your savings account, so it was easy to pick, you know, to pro- uh, prioritize one over the other.Savings account needed for emergency reserve, taking very little risk compared to a stock market, I'm gonna put my money there.For a long time since then, you haven't been able to get that return in your savings account and so when you save money in a conservative portfolio or a high yield savings account, you start to have potentially some FOMO.You start to worry about what you could be getting for a return, not only in the stock market these days, but also in crypto, right?Right.Everybody's driving around their Bitcoin Lamborghinis-and you're sitting there with your 3month savings account and you feel great about it until you compare yourself to them.It's not sexy in the eyes of young people these days-to have a savings account.I, I think it's, uh- Am I right or wrong?You're right.Okay.Do you think it's saving, uh, like a savings account is ever sexy, like it's a calling card?Yeah.At 10%, I'd find it pretty sexy.It's like, for like your third date they start asking about it.Yeah, I, I actually do.Um, so Kaylee and I, when we first started dating, we had our first finance discussion probably on our second date.I can see that out of both of you, though.Yeah.It's just, it's just our vibe, but-something that's kind of interesting though that you brought up that just kinda hit me with this, um, and it's something I haven't ever really thought about.So you're right about the rate of return on the market and everything in the '80s and whatnot, but what's kind of fascinating to me is the amount of participants in the market were much lower.Yeah.Because 401Ks weren't ever a thing until 1978.Yep.And they didn't ever get traction, and same with IRAs until the '80s.So you had very few actual investors in the stock market unless it was like the Wall Street days where you were actually buying the stocks outright with your own money.Yeah.Well, I mean, that's the thing is that think about the friction that's been removed since then too.Mm-hmm.So back then you w- if you wanted to buy a stock, you would call your stockbroker and you say, or they would b- they would call you and say, "Hey, I've got a hot new stock."Right.But either way it's- Kushon Airlines.Yeah, oh my God.It's Kofi advisors.Uh- Either way, you have to go through the broker and then you pay the broker a commission and obviously right there, you're reducing the amount of money you have to invest and there's friction of calling somebody, there's business hours, et cetera.And then you had, you know, the, last tech bubble when you had Etrade and the rise of online trading, y- Robinhood.Well, Robinhood is even later.So Etrade- Oh yeah, you're saying later.Etrade with like the little Etrade b- you ever see these Etrade baby commercials?Oh yeah, yeah, yeah, yeah.Did you ever see these?Uh, they're basically- it's a baby who's, I don't know, 6 months old or something like that.Mm-hmm.And he talks about trading in his portfolio and he was like this famous icon, like this Etrade baby icon.Everybody knew what I was talking about then.They don't know.And you would be able to trade, not ev- at all hours, but you could always just pop on when it- Yeah.your lunch break and you could buy your own stocks.And then you had Robinhood come through.Between Etrade and Robinhood, you saw all these trading fees go essentially to 0.And then Robinhood comes in and kind of like drives the final stake into trading fees and now you can trade not only like 24 hours a day, but you can buy fractions of stocks.You don't even have to buy a whole share anymore.And then you've got the, all the, the crypto like Coinbase, et cetera, you can trade on there.It's constantly going.And now there's talk about the stock market hours changing to accommodate this because if you're essentially, if you look at these traditional exchanges, they're losing traction to the modern exchanges, the modern interfaces that are trading more often.Yeah.Basically people can trade Bitcoin whenever they want, so they want the same treatment in the stock market.Yeah.You know?And, and they're getting that through Robinhood to a degree.Yeah.But it isTalking about friction, and you see this with savings rates as well, like i- you don't have to go to a brick and mortar to buy a CD.You can do it online in the same way that you can get a money market account or something like that online.Yeah.In the same way that it's much easier to spend money now with credit cards, which is- Yeah.why credit card debt has picked up in the same way that people can buy and sell stocks.And I don't know the statistics here, but, um, my guess is, is that the average rate of return for someone in a Robinhood app is probably lower than someone who just is buying and holding in the 401K.There's a lot of conspiracies about the buying and selling of stocks and treating it like it's gambling.I think the thing is that sometime- it really depends on your investing mentality and the strategies.And you- there probably, yeah, never be stats on that because everyone's so different- Yeah.in terms of their habits, but, um, anyway.Yeah.I love that movie Dumb Money.Have you seen that?Mm-mm.Yeah, that's a good one.Seth Rogan.Yeah.Everybody's Seth Rogan.Yeah.Future podcast guest.Um.So I think the psychology of the emergency reserve is kind of what we were tapping in there too.Like, does it make you feel sexy in Collin's case?Mm-hmm.Does it make you feel safe and secure outside of that and is that more valuable than, you know, the crypto Lambo that you could have had if you struck it rich with your Bitcoin or Ethereum, or enter altcoin here?Yeah.That's true.So I think that sometimes when we think about the benefits of saving, benefits of saving into a 401K can be forced savings, benefit of saving, or savingBenefit of a mortgage could be forced pay down of your debt.Right?Like it's, there are things that are like forced behaviors that can benefit you psychologically, even if they aren't always the best thing for you financially.that makes sense?Mm-hmm.Mm-hmm.Tory, you've told me before you have someYou know some people in your life that are surprised by how much you're able to save.Right?Like, it'sDo you feel likeYou said you're a good saver.Do you feel like the majority of the people that you know are good savers?Um, I don't reallyI don't know.You don't talk about that on your, at your dinner conversations like Colin does?No.I would say I don't even really know with my family.Yeah.Yeah.Like, I feel like I'm a better saver than my sister.I hope she doesn't watch this, but-that's the only w- person I can really compare to 'cause that'sI just know.Yeah.See, I think that's part of the issue is that we don't talk about these things as much.I mean, Colin is the, the standout here bringing it up on a date, but I don't think it happens very often.Yeah.You kind of, like, make assumptions.People make assumptions and- Yeah.there's a lack of financial literacy and transparency- Mm-hmm.and things feel like icky.Nobody likes to talk about money.Yeah.And then we don't know that we're in a mess like this nationally until, like, it's too late.Right.Yeah.Just out of curiosity, when you get a paycheck, do you think about how, like, needing to increase, like, your emergency fund or anything like that or does it just, like, go to savings and you just think, like, "I just wanna send this to savings," and it just goes there?Um, are youIs emergency funds different than savings?Like, I feel like at this point in my life, they're the same.Hm.Okay.That's a great question.Well, do you, in your mind, like, have a number that you always wanna have in your savings account?You don't have to say the number, but just in general where if your money got below it, you would be stressed.Yeah.Yeah.So I feel like that's in my checking account though.Okay.Like, just like- Got it.I like to also have a cushion in my checking account.Mm-hmm.And then when that number gets below'Cause I obviously know I can't get to the numbers I want to get to.Gonna take a while.And I can't stress about that, like getting to those numbers, but it's more so making sure my numbers that I have currently slowly are increasing for that cushion, butYeah.I don'tI get stressed that, like, I definitely need to reevaluate the spending -from time to time.And then kind of that's the only way I can control that.Do you keep your vacation money and rent money, like, in separate kind of mental buckets or physical buckets or does it all just go to one high-yield savings account?I pay all bills, travel stuff, fun stuff out of my checking.Okay.And then I would say my savings emergency reserve is just like a percentage of my paycheck that goes into it every other week.Let me ask you this.If your savings, the money market account or the high-yield savings got too much, or is there a point where it could get too much where you think to yourself, "I gotta do something else with this"?Um, well, I haven't gotten there yet, so- We'll cross that bridge when we get there.But yeah-I feel like it'sI like to, likeI wanna diversify.Mm-hmm.Yeah.Okay.But we'll see when I get there.But you have a number in mind-ish?I don't, I don't know.I feel like that number will constantly change.Like, once I get to that number, I'll be like, "Oh, well, maybe another thousand dollars 0 and then maybe another thousand dollars," that type of thing.You move the goal posts- Yeah.essentially.And also it's just kinda that'sI look at it as that's the money that I don't need to be spending or I don't need- Mm-hmm.because I still have this in my checkings.And so if it's my checking is what is being depleted and I'm getting worrisome about that- Mm-hmm.then I do- I don't know.I would build the checking back up instead of taking from my savings.So, question for you.Yeah.Do youSo I take it you probably have like a savings goal or a savings number that you typically always like to have too, right?Yeah, I do.So I have the cash target, like Tory was saying, like the amount I like to see in my checking account on a monthly basis, and I'm always reple- replenishing that- Yeah.because I know what my spending is and I wanna make sure I've got that plus a little buffer on a- Yeah.monthly basis.And then I've got the target for emergency reserves.Um, but then I think don'tThe, the next step isfirst of all, you have to, you have to address any lifestyle creep, right?Which is kinda- Mm-hmm.the, the point where y- you know, if you, if youknow, if you, if you, spending goes up and your earnings goes up, are you, uh, your savings going, is that going up at the same rate to address it?Um, but outside of that, what are the other goals,So if you have an emergency fund target and you hit that target, is it about, "Well, the next $100,000" or s- whatever you, I, I forget which awesome number you said.Um, but if that goes into the savings account, or does that go towards something else?Yeah, so that's my question.I think, for me, the way that I look at it is similar to you, where, and you, where I have my checking account and that's my daily spending, and then I have the savings account which replenishes the checking account, and then anything above and beyond the savings goal, um, will go into, I'll say, a higher growth stock market return.Yeah.Um, you know, I was just looking at this and thinking this through a little bit, but the difference between getting a 1% in your checking account versus a 4% in your savings account on $20,000 over a 30-year period is the difference of $40,000.Yeah.So it's a very significant amount of money.And then if you were to bump that up and say, "Well, I'm saving and, you know, now I'm going for 7%," the difference between that is hundreds of thousands of dollars.So that quick shift of saying, "I'm going from checking account to savings account" is $40,000, and then that other quick shift of going from savings account to stock account is potentially hundreds of thousands to 1000000.Yeah.I think, sometimes, y- how you value things withL- like, math is very easy to value, right?You, here, here are all the numbers- Here's the formula.Colin just said.Yeah.And h- which one are you gonna feel better about?I think the value of peace of mind is really hard to determine until you go through something where you didn't have it.And when Jess and I were first starting out and we were out in LA, and either having, like, low income, or unemployment, and student loans, and all this stuff, the stress that we went through where we'd have to make sure we had enough money in our checking account, or you'd, like, have an auto-transfer, or you'd have fees charged to you if you, like, you overdrew, and then you- Yeah.and then you covered it from your savings account because, like, you had it but it was in the wrong account.That type of stress is just brutal.And it's stressful on a relationship level too.Like, if it's, "Well, you were supposed to do that," or, "You were supposed to do this," et cetera.If you can just forgo some of that math and focus on the psychological benefit of having the s- the one-month spending in your checking and then your savings account on top of that, and so on and so forth, I don't wanna worry about maximizing my return.I think you shouldn't invest in the stock market until you have this done.You know, I'm giving you these numbers and I'm not telling you to do it until you have the first 2 buckets done.Because personally, for me, I, I also see it the other way, where people are trying to maximize their return and then every single paycheck they get, it goes into the stock market, and then they're having to take on credit card debt, and they're having to pay the fees that you just mentioned, because they're trying to maximize the return at the detriment of carrying 24% interest on their credit cards.Yeah.Which, good luck making that consistently in the stock market.Yeah.So, it's, to me, a sequence where you gotta have some cushion in your checking account, like what you have, cushion in your savings account, which is what we're just talked about as well, and then go on to something higher return.You can't do all 3 at once.No.I'm gonna compliment Tory again, because she just said, like, 5 minutes ago or whenever it was, that she knew she couldn't get there right away, right?And I think some people forget that they can't get there right away.I've had calls in the past where it's like, "Hey, I've got X amount of dollars.How quickly can you double it?"And I'm like-"I, I don't know."I honestly cannot answer that question-and that's the wrong question to be asking in the first place.But, you know, to Colin's point, the credit card situation, there are a lot of people, especially during, like, 2020, COVID periods of time, where they, you can buy crypto on Coinbase with a credit card.Right?I did not know that.Yeah.So you can just go on, you can link your credit card, and there's like a, uh, maybe there's a small fee, I can't remember, but you can take, you know, $10,000 off your credit card and buy Bitcoin.And then you hope that the Bitcoin-is gonna give you a better return than that interest rate on your credit card.There are people who took out, they mortgaged their house to buy some investment that they felt was a sure thing.And maybe they were right.But, you know, I heard horror stories of the times where theyEspecially a volatile asset, like crypto can be really, really volatile.Mm-hmm.So if you do that and then crypto goes down 50% and you have a new 7.5% mortgage, you're not feeling too great about life at that point.No, certainly not.I think, when I, again, I'm a, I'm a parent first, right?So my daughter has a savings account and she is a very good saver, like Tory, and she is a saver in a different way where she just doesn't feel the need to spend very much.Right?Um, so she doesn't make very much but she- her savings account balance is impressive based on her $11 a week allowance that she's at now.That was, you know, 7 when she was seven and eight when she was 8, et cetera.And that's just sitting in a checking account.It's not maximizing return.It's not anything, it's not in the stock market.Like, she has other investments outside of that that she probably doesn't even know about.No, she knows about it.We walked through 'em.But we're not worried about maximizing return, because she might decide to go spend that money tomorrow, right?And it's not, she doesn'tI'm her emergency reserve at this point.She has a backup.At some point, she transitions.Yeah.I like it.Cool.Well, that's pretty sweet.Tory?Final thoughts?Nothing really.I don'tThought it wasThat was a good conversation.I feel good about where I'm at with my finances, soWe're doing great, yeah.We're doing great, right?And we just keep complementing you in these, these conversations.So, hmm.Yeah, I think that'sM- m- my parting thought, and then, Collin, I'm gonna ask you for yours.The worst thing that you can do is be in that situation where you don't have money, and it's wor- it's bad when it's just you.It's slightly worse when it's somebody else.It's infinitely worse when there's other family members counting on you.And when I r- I've, I've been reading this story or this book about, um, I don't know.He's a famous investor.I can't remember the name of the book right now so that's not great.But he's talking about the Great Depression, and he was born, you know, slightly before the Great Depression.So he, you know, was 5, 6, 7, 8 when they were navigating the worst of it, right?And, you know, his earliest memory is being turned away from an apartment because that a- the person who rented out that apartment didn't rent it to families, right?So his parents, because they had kids, couldn't get that apartment.And we are very, very far removed from the Great Depression.But when you hear these stories, like the worst case scenario financially is the Great Depression: it is sometimes a, a kinda like a sober reminder of how bad things can be.And while, you know, we may always feel like we are capable of making things better, there was a Wall Street Journal article that came out, I think it was yesterday or the day before, and there was a survey of, I think it was 4,000, 4,200 people.It said 73% of the survey responders felt that they are no longer capable of achieving the American dream, right?By themselves.Like they can't just go, you know, do it themselves, right?And that's kind ofIt, it's a, an alarming headline, and it's meant to be, right?You know, Wall Street Journal has a pay wall, but this article's free, so.It's getting, getting you to pay attention to that.Yeah.Uh, but it is also a reflection of how people feel right now.It might not be reality, but it is how they feel, and that's maybe far off from the Great Depression but somehow connected to me.Yeah, it's kind ofMy final thoughts is, um, I actually think now is probably the best time in American history to, A, be alive, but to, B, to also make money.And, um, while certain- certainly there will always be some struggle out there, if you go back through every 10-year period in history, there was some form of struggle, recession, depression, or worse.Certainly, there have been some booming times as well.But if you look at actual performance and things like that, not everybody's gonna benefit from the stock market, but there's never been a time in anyone's life where they can just log into a device in their pocket and make a ton of money.And the ways in which you can make money right now is, uh, infinite and endless.But while there are a lot of easy and quick ways to make money, I think that people should focus on slow things first.And I think building up checking accounts, building up savings accounts, having those emergency reserves are the best places to start when it comes to, I'll say, um, leveling your financial ship.I think everything that you pointed, you could point out too as a way to, you know, quickly make money is, uh, also a very easy way to lose money.For sure.Yeah, yeah.I mean, um, there's a lot of easy ways to lose money, and, um, there's a lot of volatility out there.But there's a lot of good options too.I have a question.I know I had already said I had a parting thought, butSorry, I have, I have another question.second parting thought.Tori, have you seen Stick yet?Have we talked about this?No, I haven't.Okay.I gotta get Apple Music, I mean, Apple TV again.Apple TV, Apple TV+.I told you I go back and forth.You can get a free subscription for like 30 days, but I- No, I go back and forth like so, so much.She does, okay.I finish a show, and then I just shut it off.And then I'll get back when it, when it comes out again.Yeah, yeah.She's, she's churning the subscriptions.Okay, okay.I have to be strategic about it.Yeah.Time for Netflix.Yeah.Um, all right.So s- small spoiler, but not like a massive spoiler.Okay.So there's a, there's a character in the show who has an investment idea and because she's a single mom, obviously a woman, um, she comes to people with these ideas.She presents these ideas to people and she feels like they're, she's presenting them all to men, and she feels like the men talk down to her about her idea.She's totally dismissed.Right.Now her idea is to go all in on one thing, which is obviously a risky idea, right?'Cause if she's wrong, she could lose everything on it, or at least lose some value on it.And, and it doesn't matter whether she's a man or a woman, going all in on one thing is a risky idea.So what's interesting about these conversations is I feel for her and I'm like, man, like, it, you know, it must suck to not feel recognized for your intellect.She, like, she's, you know, she was a business student, um, you know, she's been running a business, and she has this idea and nobody's validating it.But at the same time, it's really risky.And in the last episode that we watched, she talked about how she was risk-aware, and that's really important.If she knows this is a big risk and she still wants to swing it, like, why, who am I to tell her, like, you can't do that.Exactly.Right.Like, diversification is great.I love diversification.Like Tory said, you want to di- diversify your portfolio, s- where you save money, et cetera.But if you decide with your money to go all in on helium, I support you, Colin.Thank you.Likewise.I would support you guys too, as long as you had your emergency fund set aside.That's good advice.All right.Thanks, guys.Thank you.That wraps up Episode 20.Today we covered why building an emergency reserve is a foundation of any strong financial plan, how high-yield savings accounts can work for you, and the impact interest rates have on your money.We need to remember before jumping into the stock market, it's important to have these building blocks in place.Thanks for listening, and we'll see you next time.Compound Growth with Wheeler and Colin, sponsored by CoFi Advisors.Reach out today.Yay!