Many times emergency funds are form of cash that are very liquid but they may well not be earning any interest or gaining value, so there could be some sense that those funds are neither working for you and that they might be losing value as fast as you can build them up, so in that sense, you might have quite a bit of hesitancy in holding very much value in cash and/or cash equivalents,
I was considering a possibility where we can store our emergency funds in other asset that could retain the value we put in it, since generally cash suffers from inflation and you know there are possibilities that our emergency funds would not be used in very long period of time and could sit around for up to 6 months without been used to do anything especially if we follow a strict rule to only touch it when we have a real emergency, but the flaw to this plan IMO would be that we expect our emergency fund to be in some way very readily available when we want to use or when we encounter an emergency cause this could potentially be a huge problem for us if our emergency fund is not around when we want it. And secondly I think there are very few asset that we can consider to be very stable to hold value in such short term and how easily it would be for us to convert back to fait if we need it, this is just an idea so I would like to hear your opinion on it or if it should be written off entirely?
No that's a bad idea. The reason for having an emergency fund is so that we can have quick access to cash during an emergency. The availability of the cash during pressing times is what makes it an emergency fund. I understand that you are looking for a way so that inflation wont meet up with the cash kept for emergency funds since it looks somehow like savings in general. But think of it the other way, cash value is more stable and wont experience sudden drops like other assets would do.
this makes a whole lot of sense. In a real practical situation, emergency funds needs to be in fiat form if it's going to be useful because in most cases, investing part of your emergency fund into a business or another viable asset will entail you're going to sell off the business to meet the emergency situation which for me is a bad strategy that's bent on frustrating you and iether put your business in big loss and and possibly damage your reputation as someone that's not capable of running an effective business.
Let's say you have an emergency fund of about $1k at the end of the year and because you feel it's just laying dormant, you decide to shift like $600 into a business which is supposed to yield some incentives over a period of time and then an emergency situation comes in and you need to sort it out with at least $900 within a short period of time. Do you think you will be able to sell out your business the same amount you used in investing into it? The chances are damn slim and the reality is that you have to pass through series of stress to see someone that's in need of what you've invested part of the money into and that at the same time have the fiat all complete to enable you sort out your issues. And what that will do to you is that you might end up selling your business at a low price that's as low as $300 or lesser and because you might not want to go into such loss, you've indirectly exposed your holding to being tampered with.
Instead of what you plan, retain your cash for emergencies funds and see if you can diversify with percentage of cash that you put inside bitcoin investment (maybe 5-10% ) out of the 30% to invest in short term assets that might offer slightly higher or average returns which may be used to support the emergency fund and foster the rate at which you accumulate your bitcoin. This way you can maintain a stable financial income flow while buying more bitcoin.
and this is also a better option. It's even good that you have a chunk of funds you can take advantage of during any possible dip so you can stack up more. The thing is that over diversification of our funds into several things can become some sort of distraction is disguise and so it's only best we focused on what we're sure is working and put in as much resource as we have into it. Probably when you've attained a status where you can boldly work out into iether to upgrading your life or possibly executing a project you've longed for then it's now okay to push your profits into them.