I have an emergency fund equal to six months of expenses. Considering this, would you consider an extended home warranty to be a waste of money?
My advice to have an emergency fund of three to six months of expenses, sitting in a good money market account with check writing privileges, is designed to cover the unexpected things that life will throw at you. The cash, combined with the easy access that kind of account allows, will make it quick and easy to take care of things in the event of a financial emergency.
Extended warranties, of any kind, are not a good deal and I don’t recommend them. You’re better off to self-insure against things breaking down, and put what would have been profit for the extended warranty company in your own pocket!
Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.