Author Topic: best place to keep emergency fund?  (Read 7716 times)

ETBen

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best place to keep emergency fund?
« on: January 23, 2016, 09:18:22 AM »
Is it a savings account or another product?  I swear I saw a thread on this and can't find it now.

And whether its a savings account or other, what are some good sites that compare those products? 

I will be getting a bonus that is at least 6 months living expenses, so I want to transfer all at once and let it sit. I am a single mother with a mortgage, so need to be able to access it easily if needed. Although I have a smaller savings for maintenance, repairs, unexpected costs.

Ursus Major

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Re: best place to keep emergency fund?
« Reply #1 on: January 23, 2016, 10:23:14 AM »
Hi ETBen,

I have my emergency savings in an online savings account. If you live in the U.S., check out www.bankrate.com for comparison of interest rates that are offered. But don't look just at the introductory rate, also look at the rate after that period, which is much more important. And of course make sure that the money is FDIC insured.

FWIW I have my savings with Ally Bank (ally.com) and they give about 1% interest last time I looked.

GrOW

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Re: best place to keep emergency fund?
« Reply #2 on: January 23, 2016, 10:37:38 AM »
Ally Bank's savings account is indeed still 1.00%. Make sure not to grab the money market account which is a bit lower at 0.85%.

LeRainDrop

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Re: best place to keep emergency fund?
« Reply #3 on: January 23, 2016, 11:53:29 AM »
Same as Ursus Major and Redcedar -- My emergency fund is parked in my Ally Bank savings account at 1.00% interest.  It's been there for a little over 7 years.

Lski'stash

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Re: best place to keep emergency fund?
« Reply #4 on: January 23, 2016, 11:58:06 AM »
Not sure where you are located, but our credit union has a three percent checking account: Lmcu.org

EarlyStart

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Re: best place to keep emergency fund?
« Reply #5 on: January 23, 2016, 12:00:53 PM »
Hi ETBen,

I have my emergency savings in an online savings account. If you live in the U.S., check out www.bankrate.com for comparison of interest rates that are offered. But don't look just at the introductory rate, also look at the rate after that period, which is much more important. And of course make sure that the money is FDIC insured.

FWIW I have my savings with Ally Bank (ally.com) and they give about 1% interest last time I looked.

Ally Bank's savings account is indeed still 1.00%. Make sure not to grab the money market account which is a bit lower at 0.85%.

Same as Ursus Major and Redcedar -- My emergency fund is parked in my Ally Bank savings account at 1.00% interest.  It's been there for a little over 7 years.

This makes me happy that I just bought Ally stock. I was going to come to thread and suggest an Ally account.


JAYSLOL

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Re: best place to keep emergency fund?
« Reply #6 on: January 23, 2016, 01:29:30 PM »
I try to keep $500 in cash at home, $50-$100 on me and around a month or two of living expenses between my checking account and my Tangerine savings account.  My TFSA (since I'm in Canada) acts as my "extreme emergency" fund, as it is very east to withdraw invested funds from it and re-contribute later.  I would only do that incase of really serious emergency though.  6 months worth is a pretty big cash emergency fund, although it's a personal choice of what you feel comfortable with. 

boarder42

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Re: best place to keep emergency fund?
« Reply #7 on: January 23, 2016, 01:44:28 PM »
Start a Roth in 5 years there is your emergency fund. I don't understand the jobs people here work to keep money not working for you literally every part of mustachianism develops e funds for different things.

An e fund is for someone who is bad at managing money. These are worthless. If you're saving properly you have no need. This whole question baffles me every time its posted
« Last Edit: January 23, 2016, 01:47:38 PM by boarder42 »

La Bibliotecaria Feroz

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Re: best place to keep emergency fund?
« Reply #8 on: January 23, 2016, 01:53:09 PM »
Start a Roth in 5 years there is your emergency fund. I don't understand the jobs people here work to keep money not working for you literally every part of mustachianism develops e funds for different things.

An e fund is for someone who is bad at managing money. These are worthless. If you're saving properly you have no need. This whole question baffles me every time its posted

No, efunds are for anyone in a vulnerable financial position. You really want to be withdrawing from your Roth every time your car breaks down? You think her kid (remember OP is a single mom) can wait 5 years for treatment if he breaks his leg? Some of us need access to cash equal to more than our monthly paychecks every now and then. We don't want to have every penny invested in case of needing it when the market is down--don't want to lock in losses.

Smokystache

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Re: best place to keep emergency fund?
« Reply #9 on: January 23, 2016, 01:55:31 PM »
What are the downsides to this strategy? (Assuming you want 4-6 months of emergency expenses available).

Put 1-2 months of expenses in savings, checking, MMA, or MMF and then 3-4 more months of expenses in a balanced fund (Vanguard Wellington, Wellsley, STAR, or something similar). Of course, the money in the balanced fund may have down years - but something like Wellington has only lost money in 2 out of the last 15 years (2008: 22.3%; 2002: 6.9%), but on the other hand it's load-adjusted return over the past 10 years is 7.27%. This assumes that you understand that this portion of your emergency fund may fluctuate a bit (and therefore you may want to overfund it a little) and that you just need to pick a specific amount and let it sit.

While it is certainly possible that you will sell at a loss, it is much more likely that you will earn a lot more over the long haul that if you put 4-6 months worth of expenses in an account making <1%. I just hate the idea of a chunk of money making <1% and I'm also assuming that Mustachians need to dip into a 3-6 month emergency fund less often than the average person - because  many Mustachians wouldn't consider replacing a 25 year old HVAC system or a 30-year old roof as an "emergency". These are known events to plan (and save) for.

One huge variable is the size of your emergency fund. I don't think this strategy is wise if you're looking at a 1-2 month emergency fund.

kpd905

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Re: best place to keep emergency fund?
« Reply #10 on: January 23, 2016, 02:10:39 PM »
I just opened a savings account with Barclays yesterday, and it only took about 10 minutes to set it up and link it to our accounts.

I tried opening a joint account at Ally, but still have not gotten the account open after almost a month.  When I applied it said that our application was pending and they'd get back to me in 3-5 business days.  I called after not hearing anything for 10 days, they said we needed to send in copies of our ID's, I did that.  Now 2 weeks later I still have not heard a word.  It scares me to have my money at a bank with such poor customer service, so I went with Barclays.

ETBen

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Re: best place to keep emergency fund?
« Reply #11 on: January 23, 2016, 03:14:11 PM »
What are the downsides to this strategy? (Assuming you want 4-6 months of emergency expenses available).

Put 1-2 months of expenses in savings, checking, MMA, or MMF and then 3-4 more months of expenses in a balanced fund (Vanguard Wellington, Wellsley, STAR, or something similar). Of course, the money in the balanced fund may have down years - but something like Wellington has only lost money in 2 out of the last 15 years (2008: 22.3%; 2002: 6.9%), but on the other hand it's load-adjusted return over the past 10 years is 7.27%. This assumes that you understand that this portion of your emergency fund may fluctuate a bit (and therefore you may want to overfund it a little) and that you just need to pick a specific amount and let it sit.

While it is certainly possible that you will sell at a loss, it is much more likely that you will earn a lot more over the long haul that if you put 4-6 months worth of expenses in an account making <1%. I just hate the idea of a chunk of money making <1% and I'm also assuming that Mustachians need to dip into a 3-6 month emergency fund less often than the average person - because  many Mustachians wouldn't consider replacing a 25 year old HVAC system or a 30-year old roof as an "emergency". These are known events to plan (and save) for.

One huge variable is the size of your emergency fund. I don't think this strategy is wise if you're looking at a 1-2 month emergency fund.


Yes this is where my brain is roaming. And thanks to the others on bank suggestions too. I too wonder about money sitting earning so little vs the chance I will need it.  I also have little frame of reference bc I grew up poor and then in a marriage with terrible money mgmt for 15 yrs.  My single mother raised me on a weeks pay equal to what I make in 4 hrs. Talk about humbling. I have a high fear of being poor again.

More info of this helps:

Single mom of 2. 
Well employed at 130k roughly.  Base 110 for a minimum figure
Budget is 4000 per month with housing as the majority, then food, etc.
I will have at least 6 months worth to deposit. 

Banking: I keep my checking acct balance pretty spare. I keep a 1500 travel fund. I keep about 2500 also for childcare twice per year. Aftercare and summer care for one of the two kids. I can tap into that for an unexpected expense and repay myself in a month or two.

Savings: over 30% SR of post tax income. I actually need to do the math.  max 401k with employer partial match. Max IRA.  Another 10k invested per year.  I also bought a house last year, so I think my SR is low compared to this year.  I haven't done the math yet.

Biggest emergency would be job loss, so pulling from a 401k would not work. Mine are penalized if loans are required if you separate employment.

I'm easily employable, unless the economy really tanked again or I couldn't work.  The salary I could get is a wide range.  6months expenses allows me to take time and find the right job, basically.


Mermaid3011

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Re: best place to keep emergency fund?
« Reply #12 on: January 23, 2016, 04:39:25 PM »
Have you thought about switching your chequing account to a bank that pays interest on your balance?

I am getting 0.8% at Tangerine for my checking account, which makes me feel at least a little better about keeping 1-2 months worth of expenses in it.

Then there is eqbank.ca who just opened and are offering 3% on their savings account (for now), which I jumped on for my 2nd wave Emergency Fund (5k max). Even if they lower the initial 3% after a while it's still a nice risk free rate.

Other savings go into my tax free savings account (TFSA = Canada). That's for real emergencies only and maxed out at 46.5k (each year I am allowed to put another 5.5k in it without paying tax on the return/interest earned).

bradleylsmith

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Re: best place to keep emergency fund?
« Reply #13 on: January 23, 2016, 05:20:07 PM »
I found a 5% interest savings account through Netspend I just started using this month. Seems like a normal bank to me easy to get money in and out. You can put up to $5000 in an account and have up to three accounts. I'm married so I plan to put $30k in these before starting to put money in the market (unless it crashes of course).

You and I can get a free $20 if you use this link to sign up:

https://mynetspendcard.com/prepaid-debit-card/applyNow.m?uref=6367006044

It's really straight forward just fill out that form, then activate the card when you get it. Once you have a login, click on the savings account link under "Move Money" in the header. That's where they advertise the 5% account.

Hope this helps, I like it better then markets because it's guaranteed.

PhysicianOnFIRE

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Re: best place to keep emergency fund?
« Reply #14 on: January 23, 2016, 05:33:14 PM »
I like to have at least 1 month of expenses in checking / savings account. 

It's a good idea to have access to several more months worth of expenses.  I think having money invested in a taxable account according to your desired asset allocation is an appropriate place for this money.  Build up a taxable account and you can have years and years worth of expenses available within a couple days.

It is also a good idea to tax loss harvest when the opportunity arises, so you'll be able to take money out tax free regardless of your income bracket.  If you are in the 15% federal income tax bracket and not subject to capital gains, this is less of an issue.

Blueeyes7767

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Re: best place to keep emergency fund?
« Reply #15 on: January 23, 2016, 06:17:31 PM »
My credit union offers an interest bearing checking account also.  I love that my money works regardless of which account I keep it in.

katsiki

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Re: best place to keep emergency fund?
« Reply #16 on: January 23, 2016, 06:20:53 PM »
As other have said, look into credit union options.  Also, Kasassa accounts pay good rates on checking and savings.  I have one that is 3.25% on checking up to 10K and 1.25% on savings (100K limit, I think).

ETBen

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Re: best place to keep emergency fund?
« Reply #17 on: January 23, 2016, 09:45:59 PM »
I have an interest bearing checking account but I wouldn't keep this much in it.

Is it reasonable to keep 2 months easily accessible in a higher interest savings acct. Then the other 4 months in something more interest gaining?  and would you keep it separate from other investments?  I will definitely look at the local credit union too. They seem to have good options on other products I've seen.

Rubic

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Re: best place to keep emergency fund?
« Reply #18 on: January 25, 2016, 12:12:40 PM »
I park $10K of emergency funds in NetSpend/Brinks accounts.  They're prepaid debit cards with a 5% savings return up to $5000 (hence the two separate accounts).

Details:  http://www.doctorofcredit.com/netspend-5-savings-accounts-on-up-to-5000/

To obtain a $20 NetSpend bonus from my referral link:

http://www.mynetspendcard.com/prepaid-debit-card/applyNow.m?uref=1906490327

Note that NetSpend will offer to upgrade your account to the premier version, but to reduce fees you probably want to keep it on a month-to-month basis. I have my USAA checking programmed for an automatic $5 transfer every other month to avoid fees (inactivity is 90 days).

NetSpend/Brinks accounts are FDIC insured.

GrOW

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Re: best place to keep emergency fund?
« Reply #19 on: January 31, 2016, 01:08:31 PM »
I park $10K of emergency funds in NetSpend/Brinks accounts.  They're prepaid debit cards with a 5% savings return up to $5000 (hence the two separate accounts).

Details:  http://www.doctorofcredit.com/netspend-5-savings-accounts-on-up-to-5000/

To obtain a $20 NetSpend bonus from my referral link:

http://www.mynetspendcard.com/prepaid-debit-card/applyNow.m?uref=1906490327

Note that NetSpend will offer to upgrade your account to the premier version, but to reduce fees you probably want to keep it on a month-to-month basis. I have my USAA checking programmed for an automatic $5 transfer every other month to avoid fees (inactivity is 90 days).

NetSpend/Brinks accounts are FDIC insured.

Runic, what is the exit plan down the road? It looks like the primary way to pulls the $5k in the future is to load it to the net spend debit card. That seems a bit clunky vs allowing an ach transfer to my other bank. Am I missing something?

bradleylsmith

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Re: best place to keep emergency fund?
« Reply #20 on: January 31, 2016, 02:13:19 PM »
I found a 5% interest savings account through Netspend I just started using this month. Seems like a normal bank to me easy to get money in and out. You can put up to $5000 in an account and have up to three accounts. I'm married so I plan to put $30k in these before starting to put money in the market (unless it crashes of course).

You and I can get a free $20 if you use this link to sign up:

https://mynetspendcard.com/prepaid-debit-card/applyNow.m?uref=6367006044

It's really straight forward just fill out that form, then activate the card when you get it. Once you have a login, click on the savings account link under "Move Money" in the header. That's where they advertise the 5% account.

Hope this helps, I like it better then markets because it's guaranteed.

I'm using the same thing - can tell you it's just like any other bank. I've just finished my 2nd account and you can ACH in / out as expected.

gliderpilot567

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Re: best place to keep emergency fund?
« Reply #21 on: January 31, 2016, 04:18:16 PM »
Very interesting. I just applied for a Western Union netSpend and will put $5000 in there after activating the card and setting up the savings account. Interested to see how it goes.
How many accounts of this type could one conceivably have? I'm probably going to set up one for myself and one for my wife, and keep $10k, but it's tempting to open a lot of these accounts and get a 5% guaranteed annual return. One person on the netSpend forums mentioned having $40k across 8 accounts, which will make a nice 2k per year. (Too bad it won't compound without opening more accounts!) Also who knows how long this deal will stay available...

I can foresee it taking a lot of micromanagement to maintain more than a couple of accounts, though. I am already planning out the various automated ACH pushes and pulls I will have to do with my main bank, to skim off all the earnings above $5k as they come in, while occasionally depositing to keep the account active.

bradleylsmith

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Re: best place to keep emergency fund?
« Reply #22 on: January 31, 2016, 04:38:43 PM »
you can have up to 3 accounts per person. I'm married so for me that's 30k, perfect for a huge emergency fund and can throw it in the market when it crashes. Even if you go over 5k per account though it still earns .5% - better than most banks.

It takes a little work to set it up and then it's free money. Set up an automated ACH push to keep the account active so you don't have to worry about it. You could do the same with the pull if you wanted.

Rubic

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Re: best place to keep emergency fund?
« Reply #23 on: January 31, 2016, 06:50:10 PM »
I park $10K of emergency funds in NetSpend/Brinks accounts.  They're prepaid debit cards with a 5% savings return up to $5000 (hence the two separate accounts).

Details:  http://www.doctorofcredit.com/netspend-5-savings-accounts-on-up-to-5000/

To obtain a $20 NetSpend bonus from my referral link:

http://www.mynetspendcard.com/prepaid-debit-card/applyNow.m?uref=1906490327

Note that NetSpend will offer to upgrade your account to the premier version, but to reduce fees you probably want to keep it on a month-to-month basis. I have my USAA checking programmed for an automatic $5 transfer every other month to avoid fees (inactivity is 90 days).

NetSpend/Brinks accounts are FDIC insured.

Runic, what is the exit plan down the road? It looks like the primary way to pulls the $5k in the future is to load it to the net spend debit card. That seems a bit clunky vs allowing an ach transfer to my other bank. Am I missing something?

Others have already replied.  ACH transfers are non-problematic.  Just transfer your funds from savings to debit and transfer.  Because the accounts are FDIC insured, you have essentially no practical risk of loss of funds.  A long-term risk is that Netspend will eliminate the 5% interest payment at some time in the future, at which point you're no worse off than you are now -- i.e. just transfer your funds to an Ally account @ 1% interest (or similar).

I only need $10K of emergency funds, hence just Netspend/Brinks, which provides me with an effortless, passive $500/year.  If you need more, you can employ up to 3 Netspend accounts (x2 if you have a SO).

PSA: Even if you don't use my referral, I encourage you to use someone's Netspend referral.  It's an effortless $20, immediately deposited into your account.

tj

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Re: best place to keep emergency fund?
« Reply #24 on: January 31, 2016, 08:03:42 PM »
You can actually have up to 5 per person. You can only have 3 backed by MetaBank though, so I have two NetSpends and an Ace Elite which are backed by MetaBank, and I have a Brinks and an H-E-B backed by BofI Federal. I also am doing Mango, so it's essentially its 30k earning 5%, or an extra $1500 per year. I wouldn't normally keep this much cash, but I plan to take some time off work and 5% risk free seems like a no brainer. Supposedly you can have more than 1 mango but I don't feel the need to have any more cash investments.

katsiki

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Re: best place to keep emergency fund?
« Reply #25 on: January 31, 2016, 08:20:24 PM »
TJ, I followed your advice and link and opened a Brinks.  Do you know if they require a real direct deposit like some of the others?  (I read that this recently changed).  Thanks for any advice!

tj

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Re: best place to keep emergency fund?
« Reply #26 on: January 31, 2016, 08:28:29 PM »
TJ, I followed your advice and link and opened a Brinks.  Do you know if they require a real direct deposit like some of the others?  (I read that this recently changed).  Thanks for any advice!

I opened my Brinks before they instituted those new terms, but everything I have read suggests that a lot of the NetSpend variants do not require a DD to enable the savings account.

frugaliknowit

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Re: best place to keep emergency fund?
« Reply #27 on: February 01, 2016, 09:47:52 AM »
I use "Kasasa" checking for my cash (2.5-3%ish for "jumping through hoops").  Kasasa.com

katsiki

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Re: best place to keep emergency fund?
« Reply #28 on: February 01, 2016, 12:12:46 PM »
TJ, I followed your advice and link and opened a Brinks.  Do you know if they require a real direct deposit like some of the others?  (I read that this recently changed).  Thanks for any advice!

I opened my Brinks before they instituted those new terms, but everything I have read suggests that a lot of the NetSpend variants do not require a DD to enable the savings account.

Thanks TJ.  I will see what happens in a week or so.