Poor people might have ONLY a very narrow path of opportunities to get out of poverty, and if they spend several years building up something like a bitcoin portfolio, and then they end up screwing up their investment because of their own slopiness they might not be able to recover again... so there could be some poor persons who had spent one or two cycles building up his bitcoin holdings and he does not have much if any of an emergency fund, but then an emergency comes and his whole bitcoin is wiped out because his bitcoin was serving as his emergency fund. .and maybe if the BTC price is down at the same time as the emergency, he might never be able to recover from what he ended up losing. Sometimes also just a bit of cash can get someone over the rough periods and to prevent a bad situation from becoming even worse because the onhand cash was able to cover the expenses until the person got back on course and started earning an income and/or maybe resolved some expenses.
Bitcoin is a savings that is kept for the future. If a person creates Bitcoin as an emergency fund, then he is making a big mistake. Because investments are made for a long term period such as 5 to 10 years. And we create an emergency fund to protect our portfolio. But there are some people who use Bitcoin as an emergency fund. If you are a person who does this, then he can find himself in many bad situations. For example
*If the price of Bitcoin decreases and then that person needs money, then he will have to sell it at a loss
*If he sells at a loss, then he will be behind in terms of money and then that person will have to take a loan.
*He will break down mentally a lot.
*He may blame Bitcoin, such as Bitcoin is fake etc.
Bitcoin is very risky, but not for everyone. Because I think Bitcoin is very low risk for people who can have proper knowledge about Bitcoin and hold their holdings for the long term. Bitcoin is very risky for people who invest in the short term or use Bitcoin as an emergency fund.
Before anything else, let’s clear this up… your savings, emergency funds, and Bitcoin investment are three completely different things. They are not the same and should not be treated like they are…
Your desire to claim that savings is different from emergency funds is a bit strange. Of course there is an investment category, yet the investment category can also be like a savings that is expected to grown over longer periods of time.
It is probably better to consider savings within categories of money that we already discuss, which it seems that savings is a form of back up funds. .and there are three forms of back up funds that can all overlap in some kinds of ways. Emergency funds, reserves and float.
Savings likely fit within either emergency funds or reserves. Emergency funds are the last line of defense that a person has before having to tap into his bitcoin, so if he has spent all his other funds, and he is tapping into his emergency funds, he is in a position that is not good, especially if the emergency funds are depleting and the next thing would be tapping into his bitcoin once the emergency funds are depleted. I personally think that a person who is in bitcoin accumulation stage would likely have to stop accumulating bitcoin once he gets down to the point of only having emergency funds, yet at the same time, guys can figure out how they treat these different categories and we could be having a semantics debate that only is arguing about the meaning of the words rather than the practical application in terms of how a guy is going to be using these various kinds of funds.
If you tell me that your savings is serving some kind of a purpose, then what is that purpose? so then it might tell us what category of back up funds it fits into.
If your savings is earning yield and you are holding it for the long term, then it might be considered as a form of investment rather than as a form of back up funds.
From my own perspective float is not something that we necessarily save up over time, yet each month if we are accounting for our expenses from our income, so that after we account for all of our expenses, then whatever amount is left over would be discretionary income; however, if we are unclear about how much our expenses are going to be, then we might hold some extra funds in float until we determine how much the expenses are going to be. Once the expenses accounting is figured out, then whatever extra amount that we had been holding in float would end up becoming discretionary income.
Yeah I get your point JayJuanGee, and I agree we might just be talking about how we are each choosing to describe things. . But the angle I was coming from when I said savings should be separated from emergency funds is based more on the purpose and intention behind them.
You mentioned emergency funds, reserves, and float, and I think that is a solid one. But in my view, savings as I was referring to it is not just a backup or reserve, it is more like a targeted preparation for specific thing or goals outside of Bitcoin.. For example, someone might be saving to scale their business, buy a piece of property, or even make a major life move. That money has a clear intention behind it, and it is usually not money you want to dip into just because something unexpected happens. That is what the emergency fund is there for.
Maybe some folks here already have a strong financial structure or consistent income that allows them to invest freely and not worry too much about these breakdowns. But for others still trying to establish themselves or build towards stability, I think it is important to treat these intentionally. Like, someone can be DCAing into Bitcoin, have an emergency fund, and still be setting aside savings specifically for launching a business or going back to school or something else important. I think separating them mentally helps a person stay organized and avoid being forced to make poor decisions under pressure.
So yeah, I am not saying savings can not overlap with reserves or investment depending on how they are used, but I still think there is value in viewing them differently from emergency funds, especially when they’re tied to a clearly defined goal or timeframe.
Hope this makes better sense…