How do you invest your emergency money?

[TexasSaver]

I am interested in finding out what other people do with their emergency money.  I have some money sitting in my bank savings account earning virtually nothing.  Obviously it would be wise to make it work a little more than it is now.  I have retirement and investment accounts with Fidelity. I chose Fidelity for my extra investing accounts because that is where my company 401k is, and it is nice having everything in one place.  I would like my investment to be pretty stable and not incur any kind of penalties if I have to withdraw some money in a pinch.

If you invest your emergency money in a fund, which one, and why did you pick it?
If you invest your emergency money in something else, what is it, and why did you pick it?

[RollCyclones]

I have mine in a high interest checking account. I get 3% by fulfilling a few requirements (estatement, one bill pay, use debit card 15X a month) up to $20,000 in funds.

Check the rates you can get in your area, www.kasasa.com

[irrational]

I'm slowly moving my e-fund to I-bonds. There is a 12 month waiting period before you can cash them (thusly why I'm doing it slowly), but they (by design) beat inflation and are virtually zero risk. I can't ask for more than that out of my e-fund.

[brewer12345]

The biggest no-brainer for such money is Pen Fed's 5 year 3% CDs currently on offer.

[oldtoyota]

I moved some of mine to a taxable Vanguard account. Another chunk of it is in my checking account. I did have it in a MMF, but I moved it to a bank when the govt default situation was happening.

Some folks would find my choice to be "risky." Here is why I did it:

--We're both currently in stable jobs.
--I accidentally saved enough to cover both salaries when the chance of my spouse losing a job is nearly 0%. This meant I had a bit more than I needed.
--I have a certain amount in a checking account so I can access that quickly if need be.
--We are living off of last month's income as per YNAB, and that gives us a buffer.

[AccidentalMiser]

Solid, dividend paying companies with stable stock prices and consistent dividends.

[Khan]

I hold about 1-2 months of cash in my bank account.(2k)
I pay for a cadillac health plan.
I have a 5k credit card limit.
My taxable investment account is margin approved.

I don't like cash, I like sending my little dollars to go get me more dollars, primarily in strong dividend paying companies. If the market tanks -and- I have an emergency, I'll eat the losses. I'm fine with this

[iamlindoro]

It all sits in my taxable investment account, allocated as normal.  In a "oh shit" emergency that doesn't give me enough forewarning to get at it over 2-3 days, I have multiple credit cards which are always paid off.  I just don't like the idea of that money sitting somewhere earning at or less than inflation.  There's enough in the taxable accounts that the market could take a massive dive and I'd still have plenty to cover an emergency.

[AtlStash]

I keep ~$5k in checking, $10k in a Capital One 360 account, a $8k CC with no balance and then everything else in stable dividend paying stocks. I know the 10k is missing out on some interest but my SO doesn't feel very secure without it where it is.

[gimp]

My CC has a 15k limit (don't ask why they gave me such a high limit). It usually has a balance of a couple hundred that is paid in full each month. That'll do for emergency money in a pinch.

[sloof70]

I keep it in Vanguard index fund.  My job is very stable, so there's no worries there.  I also have good insurance and quite a bit in my HSA account.  I only keep a couple grand in my checking account.  Between the cash, Vanguard fund, HSA, unemployment, family, credit cards, and backup employment options, I don't have much to worry about.

[ZiziPB]

I keep mine (about 6 months worth of expenses) in liquid CDs earning very little interest.  It gives me peace of mind and allows me to sleep at night.  If I were to lose my job (not likely, admittedly), I think it would take me at least 6 months to a year to find something comparable, and it would most likely require a relocation.  I also have a decent HSA account and 3 CCs with about $70K of available credit limit (I use one regularly and pay it in full every month).  Although a credit card is the last thing I would turn to if I lost my job....

Also, I view the cash holdings as a way to diversify my portfolio. 

[clutchy]

it sits in a bank account costing me money.  I consider it insurance and as such it costs me money to guarantee it will be there if I need it. 

Yes, it sucks to have $20,000 just languishing...

[FIreDrill]

Mine is sitting in an Ally money market account.  I have a debit card and checks linked to it for easy access and I believe it's currently earning .84%

[olivia]

it sits in a bank account costing me money.  I consider it insurance and as such it costs me money to guarantee it will be there if I need it. 

Yes, it sucks to have $20,000 just languishing...

Ditto...I just don't feel comfortable putting my emergency fund elsewhere.  I may try to find a higher interest savings account but I'm afraid I won't remember to jump through all the hoops for the accounts that actually have good interest rates (if those even exist anymore!).

[gooki]

I have mine sitting in a 4% savings account.

[mm31]

I have 50% sitting in a savings account, 25% in a bond index fund, 25% in a stock index fund. I have enough saved so that a 50% decrease of value in my stock allocation would not affect the amount I need.

I usually don't reinvest the dividends I get from my bond and stock fund.

[thelamb]

I have debt (mostly remodel) and paying it all off is priority #1.  It doesn't make sense for me to carry an emergency fund until the debt is gone.  Therefore, the closest I have is a home equity line of credit, which, in fact, is the debt that is first priority for pay off.  After all debt is gone, I plan to simply invest in a Vanguard index fund via etrade every extra penny that isn't going to non-taxable funds and probably carry two months of expenses in a non-earning checking.  The only penalty would be in the form of taxes if I had to sell assets to convert to emergency cash. 

[MrsPete]

Mine's in a savings account drawing only a small amount of interest.  In the grand scheme of things, this is a very small amount of money, and the point is to have it ready immediately in case of an emergency.

[lauren_knows]

I have about 3 months worth of expenses sitting in a normal savings account at my credit union.  The rest of what I consider "emergency" funds, is in a taxable brokerage account.  If my wife weren't much more conservative than myself, we'd have maybe 1 month worth of expenses in cash, and the rest invested.

[Latito]

My mortgage gives me the option to pay down extra principal whenever I want and track the cumulative amount of those extra payments.  That amount can then be taken back at any time.  Effectively this gives me a tax-free guaranteed [current mortgage rate]% investment with access to the money next business day.  For truly instant cash needs I have a much higher limit on my credit cards than I actually need.

[lauren_knows]

My mortgage gives me the option to pay down extra principal whenever I want and track the cumulative amount of those extra payments.  That amount can then be taken back at any time.  Effectively this gives me a tax-free guaranteed [current mortgage rate]% investment with access to the money next business day.  For truly instant cash needs I have a much higher limit on my credit cards than I actually need.

Taken back at any time? Is there a standard name for this kind of program? Seems enticing to me.

[huadpe]

My mortgage gives me the option to pay down extra principal whenever I want and track the cumulative amount of those extra payments.  That amount can then be taken back at any time.  Effectively this gives me a tax-free guaranteed [current mortgage rate]% investment with access to the money next business day.  For truly instant cash needs I have a much higher limit on my credit cards than I actually need.

Taken back at any time? Is there a standard name for this kind of program? Seems enticing to me.

Sounds basically like a HELOC.  It's possible they're doing some sort of hybrid amortized mortgage/HELOC or just have a HELOC for their entire mortgage balance.

[Latito]

It's this: https://www.coastcapitalsavings.com/Personal/Borrowing/Mortgages/Youre_The_Boss_Mortgage/

I'm not sure if there is a standard name for this type of product as I find this credit union likes to come up with some creative products at times.

Note that you can't take back your down payment or any regular payments - just extra payments.  Those extra payments "behave" just like an extra payment on your mortgage would until I take them back.  If I finish paying off my mortgage I don't believe I could then re-borrow those extra payments at my current rate as the mortgage would be closed.  It's got some qualities like a HELOC, but is definitely different.

[huadpe]

Huh, yeah, that's an odd product.  Never seen one structured like that before.

[randymarsh]

This thread has me thinking I should reduce my cash.

I have $700 in savings and keep another $1,000 in checking at any given time. I still live at home and don't pay for anything except my car and gas, leaving me $500+ per month to save/invest. I have 20K+ available on credit cards. A lot of that is actually interest free until Feb 2015.

Should I go lower? I have student loan debt at 7.9% I'd like to kill. I was thinking keeping less cash would help my student loan situation and be less tempting to spend. But cash on hand feels like a nice warm blanket.

[Charlotte]

Ours is in a money market account at our credit union. Easily accessible and we can transfer into with a couple of clicks on the website.

We haven't decided how much it's going to be ultimately, for now we are just letting it grow. This time next year we will have to make a decision though....

[Khan]

This thread has me thinking I should reduce my cash.

I have $700 in savings and keep another $1,000 in checking at any given time. I still live at home and don't pay for anything except my car and gas, leaving me $500+ per month to save/invest. I have 20K+ available on credit cards. A lot of that is actually interest free until Feb 2015.

Should I go lower? I have student loan debt at 7.9% I'd like to kill. I was thinking keeping less cash would help my student loan situation and be less tempting to spend. But cash on hand feels like a nice warm blanket.

Unfortunately, none of us can decide for you what you're comfortable with. We've all come to our own conclusions about what makes us feel comfortable, and you're going to have to do the same. The good news is that the opportunity cost of having $1700 doesn't really matter much in the end, that total amount would only amount to something like 135$ over the course of a year in interest costs from your student loan, and that would leave you with a 0$ balance in your bank account month-month, which IMO is more dangerous. IMO, the choice between having 2-5k in actual liquid cash as an emergency fund vs. 20k of dead money is absolutely clear for myself, but the difference between having 1700$ and 0$ is absolutely negligible in the short term, and sure as hell wouldn't feel very nice mentally/emotionally either.

If the 1700$ was the last bit of your student loans, and you wanted to be free and clear, I'd cheer for you. But if it's not... I wouldn't go for broke on not having any cash -as cash-.