Dear Dave,

 

Are home warranties a waste of money if you already have a fully-funded emergency fund containing six months, or even more, of expenses set aside?

 

Jodie

 

Dear Jodie,

 

I don’t do extended warranties, because they’re not a good deal. In my mind, you’re better off to self-insure against damage or things breaking down. That way, you can put what would have been profit and marketing dollars for the extended warranty company in your own pocket. I mean, think about it. If you buy something, but can’t afford to fix it if something goes wrong, it’s not really a smart move to buy it in the first place, is it?

 

I always recommend an emergency fund of three to six months of expenses to cover the unexpected things that life will throw at you. In most cases, this amount of cash—sitting in a good money market account with check writing privileges—will allow you easy access in the event of unexpected expenses or a financial emergency.

 

—Dave

 

 

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, Fox News, CNN, Fox Business and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.