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Dave Ramsey says: Build emergency fund, turn down home warranty

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Dear Dave,

Are home warranties a waste of money if someone has been following your plan and already has six months of expenses set aside in an emergency fund, plus home insurance?

— Andrea

Dear Andrea,

Home warranties are a waste of money even if you don’t have quite that much set aside in an emergency fund.

I recommend an emergency fund of three to six months of expenses to cover the unexpected things that life will throw at you.

This amount of cash, sitting in a good money market account with check writing privileges, will give you easy access in the event of a financial emergency.

I don’t recommend extended warranties of any kind.

They’re just not a good deal. You’re better off to self-insure against things breaking down, and putting what would have been profit and marketing dollars for the extended warranty company in your own pocket!

— Dave

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