| Most personal financial advisors suggest having 3 - 6 mos. level of income available immediately in case of emergencies, lay-off, etc. I routinely recommended that, as well - but I haven't followed that course, myself, a good bit of the time, even in my earning years, when income was dependent on turning up for work. And usually told my clients the following story, in case they chose to use it. Now that I'm retired, all that I have to do to qualify to have my monthly pension amount deposited into my bank account is ... ... stay alive. I may have a back so decrepit that I can hardly walk, be sick abed, travelling in Mongolia, or whatever - it still gets deposited. Which means that I am less at risk of needing emergency money than when employed, with less assurance of continuing income. Sometimes I've had a substantial balance on hand, usually mostly in stockbroker account, often mainly in money market funds, especially when the stock market seemed too high. But I have drawn a number of certificates for my equity-based mutual funds (no fee), and paid to have certificates issued for a number of my stocks, then have used them as collateral underlying a fully secured Letter of Credit at the bank (lower interest rate than borrowing from broker), currently 6%. I think that setting up a Home Equity LOC often requires some fees, and there were none asociated with mine, based on easily saleable securities. Some charge a fee to let it lie unused, but mine does not, and it lies unused a good portion of the time. Sometimes I use it when in need of unexpected purchase, e.g. buying a car (but bought two older models within the past year and a half, for - under $3,000. - cheque). I have a "credit" (really "debt") card, which I don't use much, but I could use it for immediate emergency, drawing on the LOC to pay the balance before the due date, so no interest. One problem with this system is that one usually needs about $20,000. of asset value in order to qualify for a $10,000. loan. And I would recommend that one not draw full value of that credit available - for if the value of the underlying stocks decreases by 20% ... the amount of loan allowed will decrease by 10%. If a larger amount has been borrowed, the lender will require cash or more securities - today ... or tomorrow, at the latest. I've never borrowed so close to my credit limit that I suffered a margin call - don't ever want to, either. If I borrow for emergency use, the interest that I pay on the loan is not deductible (but the underlying mutual funds and stocks continue to earn - and grow, most of the time). If I use the LOC to borrow to invest, the interest is deductible. I wrote a post starting a thread here a few week s ago telling how I thought that I can make such a loan at almost no net cost. Which makes it wise for me to have two letters of credit, one for emergency use, one to use for investment loans, when I choose to make them. (I should have made some of the latter about three or four years ago - but didn't). Over a substantial period, the mutual funds pay me a variable current rate of return. The dividend rates on the stocks tends to grow, over time. Usually lower than the interest that I could earn, I agree, but that's fine - I don't need the money now. Most of those earnings come to me at a much lower rate of tax than I'd have to pay on interest income, which is taxed at top rate. When I put my money into a CD, GIC, bond or other instrument where the number of base dollars is guaranteed not to shrink, there's another guarantee that the bank never mentions - it can't grow, either. The only earning that I can obtain from that money is the interest. And interest income is all earned now. And it's taxed at top rate - I like to avoid that, when possible. Most of my equity-based mutual funds, and stocks, increase in value over time. I don't receive any of that value now. So I'm not taxed on it now. I only have to realize that increased value when I sell them - or die - which gives me a good deal of the value obtained in tax-deferred retirement accounts, which defer tax liability until withdrawals are made. But those with retirement accounts have every dollar withdrawn added to income and taxed at regular rate. When I cash my investments, I usually pay tax at a much reduced rate. I like that system better than having my invested dollars earn all that they'll ever earn relative to this year, right now, and taxed now, plus taxed at top rate. I'd prefer to defer part of the income - and pay tax then ... at a reduced rate. Such a system might work for some of you, should you so choose. ole joyful | 
