So you’re saving for your emergency fund. First of all, congrats! You’re being responsible and it will feel REALLY good to have money stashed away if something was to happen (and it will eventually… that’s life).
If you’re not sure how much you should save, check out this blog post.
The question is, where should you keep your emergency fund?
When you’re saving for your emergency fund, keep it in a safe account that you can easily get access to in case of emergency.
Keep Your Emergency Fund in a Savings Account
We recommend keeping your emergency fund with the same bank you bank with. The issue with this is that most big banks have laughable interest rates on accounts. There’s nothing like making 3 cents on your $10,000 in that account ????
We moved our accounts from Chase to Ally Bank for this reason. They have very competitive rates and their accounts are completely free.
If you don’t want to bank completely with an online bank, you could still open a free checking and savings account with one and just use the savings account. That way if you ever need that money from savings immediately, you would have a debit card and checks so you don’t need to wait a couple of days for your funds to transfer to your primary account.
Don’t Keep Your Emergency Fund At Home
Some may be tempted to have your emergency fund in cash at home, like under a mattress. The issue with this is that it isn’t secure. What if you have a fire in your home or it’s broken into? Then what?
Don’t Put Your Emergency Fund in an Investment Account
We get it. You want to make money back on the thousands of dollars you have in your emergency fund and invest it. Plain and simple – don’t. Keeping your emergency savings in an investment account is not smart. If you have a true emergency and need your cash immediately, you can’t quickly sell your investments like stocks or Roth IRA’s to get access to that cash.
Not to mention if it’s an investment account, chances are that you’ll have big penalties for withdrawing the money.
Wherever you keep it, just make sure it is safe and you can get to it quickly in case of an emergency.
