Author Topic: Emergency Fund--Where Do You Keep It? (Read 22476 times)

VioletVixen · « **on:** February 12, 2015, 08:01:50 PM »

Hello,

I'm wondering where the best place is to hold my Emergency Fund money? Should I put it in an interest-gaining savings account like Barclay's with 1% APY? Do the taxes on the interest even make these accounts worth it? Where do you all keep your Emergency Funds?

I would like an account where I can contribute to both a "saving for goals" fund and a designated "emergency" fund. Is something like this possible? I can't create an account within my bank account to delineate what the money is for, plus I only get .1% interest.

Thanks!

slugline · « **Reply #1 on:** February 12, 2015, 10:22:00 PM »

A savings account is just fine for an emergency fund of a few months worth of expenses. Ideally you won't really have a lot of EF-designated money, so the opportunity cost of higher returns won't matter too much. For the "savings for goals" funds, I like to consider how soon each of my goals is coming. The farther away that date is, the more tolerance for volatility I can afford.

Less than two years away? Savings account is just fine.
Between two and five years? A short-term bond fund can give me a little more return with a little more volatility risk.
Five to ten years away from your goal date? Put most in a bond fund and some in a stock fund.
More than ten years away? Mostly in a stock index fund.

MDM · « **Reply #2 on:** February 12, 2015, 11:01:25 PM »

You have to put it somewhere, so 1.0% is better than 0.1%.

slugline's suggestions seem reasonable.

As your overall liquid net worth grows, you can start to consider some portion of taxable accounts and Roth contributions as your e-fund and not bother with the savings account at all.

The operative definition of "grows" depends on your risk tolerance, but when "some small fraction" (10%? 5%? 15%? ...?) of your taxable accounts and Roth contributions equals the amount you want in an e-fund you could dispense with the formal e-fund.

Keeping some cushion in the checking account to avoid bouncing checks is still a good idea, no matter the location of the e-fund.

MrsPotts · « **Reply #3 on:** February 12, 2015, 11:14:06 PM »

In the Lego box... :)

Runningtuff · « **Reply #4 on:** February 13, 2015, 02:48:41 AM »

Savings account at 4.5%

2Birds1Stone · « **Reply #5 on:** February 13, 2015, 04:38:01 AM »

Cold hard cash in various denominations.

themagicman · « **Reply #6 on:** February 13, 2015, 06:08:00 AM »

Quote from: violetvixen on February 12, 2015, 08:01:50 PM

Hello,

I'm wondering where the best place is to hold my Emergency Fund money? Should I put it in an interest-gaining savings account like Barclay's with 1% APY? Do the taxes on the interest even make these accounts worth it? Where do you all keep your Emergency Funds?

I would like an account where I can contribute to both a "saving for goals" fund and a designated "emergency" fund. Is something like this possible? I can't create an account within my bank account to delineate what the money is for, plus I only get .1% interest.

Thanks!

Look at lake michigan credit union checking. They give you 3% interest on up to 15,000. All you have to do is direct deposit or ACH into the account once a month and use the debit card 10 times. (I just pay my comcast bill in 10 different transactions with it)

Kris · « **Reply #7 on:** February 13, 2015, 07:04:44 AM »

What Vanguard bond fund do you guys like?

themagicman · « **Reply #8 on:** February 13, 2015, 07:21:27 AM »

Quote from: Kris on February 13, 2015, 07:04:44 AM

What Vanguard bond fund do you guys like?

Depending on your income, either total bond market or intermediate munis

MustachianAccountant · « **Reply #9 on:** February 13, 2015, 09:07:45 AM »

Quote from: Kris on February 13, 2015, 07:04:44 AM

What Vanguard bond fund do you guys like?

I'm a fan of VTI - Intermediate Corp Bond fund.

trailrated · « **Reply #10 on:** February 13, 2015, 10:04:03 AM »

Quote from: Runningtuff on February 13, 2015, 02:48:41 AM

Savings account at 4.5%

What bank is this?!?!?!

epipenguin · « **Reply #11 on:** February 13, 2015, 10:13:22 AM »

I have the first 3-4 months of expenses in an online savings account (Capital One). I think it's currently earning 0.75%, so not the best, but not the worst either. Then I have another 4-5 months in I bonds.

Edit: Capital One 360 lets me create sub-accounts easily. So as I like seeing the money all separated out, I have different accounts for the EF, new car, vacation, and others.

thebeachbum · « **Reply #12 on:** February 13, 2015, 10:50:21 AM »

I had a similar question to this one.

MMM talks about having springy debt instead of an EF. Has anyone done this? opened up a line of credit on their house or something that they dont use, but is there if they ever need it? if so what was the process like? is there any cost associated with having it? or just interest if you do dip into it?

mjs111 · « **Reply #13 on:** February 13, 2015, 11:07:46 AM »

I use a Capital One 360 account like some other posters have mentioned. 0.75% APY currently.

Mike

themagicman · « **Reply #14 on:** February 13, 2015, 11:19:43 AM »

Quote from: thebeachbum on February 13, 2015, 10:50:21 AM

I had a similar question to this one.

MMM talks about having springy debt instead of an EF. Has anyone done this? opened up a line of credit on their house or something that they dont use, but is there if they ever need it? if so what was the process like? is there any cost associated with having it? or just interest if you do dip into it?

I have done this. I opened a home equity line of credit with penfed and there are zero costs for me as long as you keep the account open for 3 years. I do not have to borrow anything and will not pay any interest or fees if I do not. My line of credit was for $55,000. I can write checks out of it or just transfer funds to my bank account.

Dr. Doom · « **Reply #15 on:** February 13, 2015, 11:34:06 AM »

Quote from: themagicman on February 13, 2015, 11:19:43 AM

Quote from: thebeachbum on February 13, 2015, 10:50:21 AM
I had a similar question to this one.

MMM talks about having springy debt instead of an EF. Has anyone done this?

I did this as well, 2.5% HELOC at 0 balance, $25 a year maint. fee. Given the market runup of the last 6 years, this strategy has definitely paid, my dollars have been in the market making money instead of in a checking account.

Here's the link to the MMM article btw.

MustachianAccountant · « **Reply #16 on:** February 13, 2015, 01:07:50 PM »

Quote from: thebeachbum on February 13, 2015, 10:50:21 AM

I had a similar question to this one.

MMM talks about having springy debt instead of an EF. Has anyone done this? opened up a line of credit on their house or something that they dont use, but is there if they ever need it? if so what was the process like? is there any cost associated with having it? or just interest if you do dip into it?

The only cost for us (through a local CU) was increased home insurance. The HELOC contract required we have a much lower deductible ($1k) than we had previously, and that increased our home insurance by about $100/year.

Debtless in Texas · « **Reply #17 on:** February 13, 2015, 01:17:01 PM »

I throw mine into an Ally Bank money market account at .85%. I had it in smartypig, but it was a pain in the ass to get at when we needed it - so off to Ally it went. We got checks and debit cards to truly keep it liquid and .85% is better than .01% at my brick and mortar.

Im happy to have it earning something while just sitting there. I still don't trust the HELOCs (remember 2008?) and technically they not funds. They can also be reduced or canceled by those who issue it for whatever reason they want. My time in the Army taught me to hope for the best and plan for the worst and this is one of the rare instances where I disagree with MMM.

cautiouspessimist · « **Reply #18 on:** February 13, 2015, 01:21:14 PM »

I have a separate fund in my shiny new Betterment account that's mostly in bonds that is my 'emergency fund.' In general, however, I plan on using my credit cards first. The main thing that I need (and am still working on building up) is the ability to pay my mortgage if I'm out of work for more than 1-2 months. I could live off my credit cards for several months if I needed to. Most of my monthly bills already go there (and several of those would probably be minimized if I were out of work).

VioletVixen · « **Reply #19 on:** February 13, 2015, 05:19:19 PM »

Thanks for all of the opinions!

Has anyone used Barclays? No one seems to have mentioned it and it appears to have the highest interest rate (1.0%). Is there something wrong with this company that I'm not aware of?

Using a HELOC seems like a bad idea to me; how is that a true emergency fund if it's really just a loan? Where do you get the money to pay it off before interest starts accruing?

MDM · « **Reply #20 on:** February 13, 2015, 05:39:34 PM »

Quote from: violetvixen on February 13, 2015, 05:19:19 PM

Has anyone used Barclays? No one seems to have mentioned it and it appears to have the highest interest rate (1.0%). Is there something wrong with this company that I'm not aware of?

GE Capital Bank has 1.05%: https://www.gecapitalbank.com//en.html

VioletVixen · « **Reply #21 on:** February 13, 2015, 05:46:27 PM »

Barclays also has 1.05% in this account: https://www.banking.barclaysus.com/online-savings.html?refid=BBDQSRTMR011213&lag=BBDQSRTMR011213
Click on the "Dream Account" tab.

I just keep getting Barclays recommended on my Mint account and wonder why no one here uses it! :)

sirdoug007 · « **Reply #22 on:** February 13, 2015, 05:48:36 PM »

Quote from: themagicman on February 13, 2015, 11:19:43 AM

Quote from: thebeachbum on February 13, 2015, 10:50:21 AM
I had a similar question to this one.

MMM talks about having springy debt instead of an EF. Has anyone done this? opened up a line of credit on their house or something that they dont use, but is there if they ever need it? if so what was the process like? is there any cost associated with having it? or just interest if you do dip into it?

I have done this. I opened a home equity line of credit with penfed and there are zero costs for me as long as you keep the account open for 3 years. I do not have to borrow anything and will not pay any interest or fees if I do not. My line of credit was for $55,000. I can write checks out of it or just transfer funds to my bank account.

+1. I also opened an interest only PenFed HELOC. I intend to keep the balance at zero for 99% of the 15 year term. Interest is 3.75% (tax deductible) now or prime + 0%. It's a great deal with no cost at all unless you use it.

Sent from my iPhone using Tapatalk

MDM · « **Reply #23 on:** February 13, 2015, 05:58:39 PM »

Quote from: violetvixen on February 13, 2015, 05:46:27 PM

I just keep getting Barclays recommended on my Mint account and wonder why no one here uses it! :)

No particular reason for us. GE Capital had the highest rates when we looked a while back, and all we wanted was a parking place for some upcoming large expenses.

fartface · « **Reply #24 on:** February 13, 2015, 06:27:42 PM »

Quote from: MDM on February 13, 2015, 05:39:34 PM

Quote from: violetvixen on February 13, 2015, 05:19:19 PM
Has anyone used Barclays? No one seems to have mentioned it and it appears to have the highest interest rate (1.0%). Is there something wrong with this company that I'm not aware of?

GE Capital Bank has 1.05%: https://www.gecapitalbank.com//en.html

I have $20K in my emergency fund through GE Capital Bank. It was very easy to sign up online and deposit funds. I've had them for over a year and switching money from my checking to their savings and vice versa is quick. I earn 1.05%.

themagicman · « **Reply #25 on:** February 13, 2015, 07:44:40 PM »

Quote from: violetvixen on February 13, 2015, 05:19:19 PM

Thanks for all of the opinions!

Has anyone used Barclays? No one seems to have mentioned it and it appears to have the highest interest rate (1.0%). Is there something wrong with this company that I'm not aware of?

Using a HELOC seems like a bad idea to me; how is that a true emergency fund if it's really just a loan? Where do you get the money to pay it off before interest starts accruing?

You can use the HELOC to pay for the HELOC minimum payments in an extreme emergency

VioletVixen · « **Reply #26 on:** February 16, 2015, 08:51:45 PM »

Quote from: MustachianAccountant on February 13, 2015, 09:07:45 AM

Quote from: Kris on February 13, 2015, 07:04:44 AM
What Vanguard bond fund do you guys like?

I'm a fan of VTI - Intermediate Corp Bond fund.

Why do you favor this fund? Is it a bad idea to use a bond fund as an emergency fund? Is it liquid enough or do I still need 2-3 months in the bank?

Runningtuff · « **Reply #27 on:** February 17, 2015, 12:43:03 AM »

Quote from: trailrated on February 13, 2015, 10:04:03 AM

Quote from: Runningtuff on February 13, 2015, 02:48:41 AM
Savings account at 4.5%

What bank is this?!?!?!

ANZ, in NZ.

moustache1979 · « **Reply #28 on:** February 17, 2015, 03:49:40 AM »

Barclays is good. Site/features not as good as CapOne 360 but better rates. CD rates not bad either (5yr was 2.25/2.5% range at last check)

I'd be inclined to use these or the GE accounts rather than bond funds at this point.

minority_finance_mo · « **Reply #29 on:** February 17, 2015, 04:14:12 AM »

I have it in a 1% interest checking account with Capital One 360.

VioletVixen · « **Reply #30 on:** February 17, 2015, 09:17:26 PM »

Quote from: moe_rants on February 17, 2015, 04:14:12 AM

I have it in a 1% interest checking account with Capital One 360.

How did you get 1% interest? Right now I see it is at .2%...

Retire-Canada · « **Reply #31 on:** February 18, 2015, 07:25:55 AM »

Quote from: violetvixen on February 12, 2015, 08:01:50 PM

Where do you all keep your Emergency Funds?

I keep:

- $1K cash in house
- $4K cash in various account as a float to pay mortgage/bills
- $0-$5K accumulated savings that get invested at $5K
- $10K line of credit
- $20K credit cards

If I needed more than $10K for any length of time I'd get a low interest loan against my house to cover it.

If lack of work meant I couldn't get a loan I'd sell some investments or a vehicle.

My GF and/or parents would loan me several months of living expenses if needed, but I'd do everything else first.

-- Vik

Dr. Doom · « **Reply #32 on:** February 18, 2015, 08:15:04 AM »

Quote from: Debtless in Texas on February 13, 2015, 01:17:01 PM

I still don't trust the HELOCs (remember 2008?)

Yep, and this is a fair point. HELOCs were in some cases closed by banks to homeowners with underwater (distressed) homes that no longer had the equity. Bye-bye emergency fund.

I had some taxable accounts that I could tap that represented my plan B if my HELOC disappeared. It's good to know your options.

KatieSSS · « **Reply #33 on:** February 18, 2015, 02:53:27 PM »

Quote from: violetvixen on February 13, 2015, 05:46:27 PM

Barclays also has 1.05% in this account: https://www.banking.barclaysus.com/online-savings.html?refid=BBDQSRTMR011213&lag=BBDQSRTMR011213
Click on the "Dream Account" tab.

I just keep getting Barclays recommended on my Mint account and wonder why no one here uses it! :)

I use Barclay's, but not for my E-Fund. With the Barclay's Dream Account, you get bonus interest if you don't withdraw money. Since I might have to withdraw from my E-Fund at any time, I keep that with Capitol One 360 like others here. I use Barclay's for my future home savings at the moment. I have it set to deposit a certain amount each month, and every 6 months (or something like that) you get bonus interest if you deposited money each month and not taken any money out. I like both Barclays and Capitol One 360 for different reasons.

Vertical Mode · « **Reply #34 on:** February 18, 2015, 08:31:06 PM »

I encountered this same issue earlier this year. Realized that I was leaving interest on the table by leaving my emergency fund in the Vanguard Money Market account and did a little research on alternatives. Went with the Capital One 360 Savings for ease of access, a relatively good 0.75% rate, and to provide a convenient location to receive the cash rewards bonus from my Capital One credit card hacking. Funds are currently split between these two - over the next several months, I'll be phasing out the Vanguard position and padding the savings account a bit before returning to my regularly-scheduled programming :-)

As others have touched on, I think it's wise to look at the logistics of HOW to move your money in/out in addition to considering your time horizon and the interest rate/risk of whatever option(s) you choose.

vagon · « **Reply #35 on:** February 18, 2015, 08:44:50 PM »

In my 100% mortgage offset account. Acts as if it were the paid as principle against the loan.

VioletVixen · « **Reply #36 on:** February 18, 2015, 10:35:00 PM »

What about keeping it in a Roth IRA? Can't you take out contributions to that at any time without penalty?

Full Beard · « **Reply #37 on:** February 19, 2015, 11:19:14 AM »

I keep my emergency fund at Navy Federal Credit Union. In October of last year they offered a celebratory certificate that pays 5% for a year with a maximum of $5,000. I also opened up an Easy start certificate at NFCU that pays 3.2% for a year with a maximum of $3,000. The cool thing about the Easy start is that you can add to it at any time for those of us with lower incomes that can't do it all at once.

The celebratory certificate is no longer offered, but the special Easy start is still available for those eligible for membership at NFCU.

johnny847 · « **Reply #38 on:** February 19, 2015, 01:34:50 PM »

Quote from: violetvixen on February 16, 2015, 08:51:45 PM

Quote from: MustachianAccountant on February 13, 2015, 09:07:45 AM
Quote from: Kris on February 13, 2015, 07:04:44 AM
What Vanguard bond fund do you guys like?

I'm a fan of VTI - Intermediate Corp Bond fund.

Why do you favor this fund? Is it a bad idea to use a bond fund as an emergency fund? Is it liquid enough or do I still need 2-3 months in the bank?

You've got the wrong ETF here - VTI is total (US) stock market index.

michaelanthony · « **Reply #39 on:** February 19, 2015, 02:48:18 PM »

I keep some cash in a savings account, and some in VTI, but recently I started allocating some to Lending Club, investing in the "safer" A and B loans, without doing automatic re-investing.

Of course, your money is not liquid, but you still receive interest payments every month, so there is some cash flow. To me, it's a (riskier) way to try to get 4%-6% return on some of my cash that is otherwise barely earning anything.

BarkyardBQ · « **Reply #40 on:** February 19, 2015, 03:23:39 PM »

Quote from: violetvixen on February 13, 2015, 05:46:27 PM

Barclays also has 1.05% in this account: https://www.banking.barclaysus.com/online-savings.html?refid=BBDQSRTMR011213&lag=BBDQSRTMR011213
Click on the "Dream Account" tab.

I just keep getting Barclays recommended on my Mint account and wonder why no one here uses it! :)

We use the Barclay's DA, we hold 2.5 months of expenses there and we have $5x26 go to it to keep the automatic deposit going and get the additional bonus APR's.

SantaFeSteve · « **Reply #41 on:** February 19, 2015, 03:35:10 PM »

Quote from: epipenguin on February 13, 2015, 10:13:22 AM

I have the first 3-4 months of expenses in an online savings account (Capital One). I think it's currently earning 0.75%, so not the best, but not the worst either. Then I have another 4-5 months in I bonds.

Edit: Capital One 360 lets me create sub-accounts easily. So as I like seeing the money all separated out, I have different accounts for the EF, new car, vacation, and others.

+1 This is our go-to for our short term money

SantaFeSteve · « **Reply #42 on:** February 19, 2015, 03:41:57 PM »

Quote from: Full Beard on February 19, 2015, 11:19:14 AM

I keep my emergency fund at Navy Federal Credit Union. In October of last year they offered a celebratory certificate that pays 5% for a year with a maximum of $5,000. I also opened up an Easy start certificate at NFCU that pays 3.2% for a year with a maximum of $3,000. The cool thing about the Easy start is that you can add to it at any time for those of us with lower incomes that can't do it all at once.

The celebratory certificate is no longer offered, but the special Easy start is still available for those eligible for membership at NFCU.

My wife and I took advantage of both of these special offers, and are quite pleased about them. She has a checking account with them and we take advantage of the special offers, but use CapitalOne360 for our savings because the rate is better.

kpd905 · « **Reply #43 on:** February 19, 2015, 05:40:09 PM »

I've decided to start hitting some checking account bonuses, which tend to tie up money for 6 months or so. I opened one at PNC and will get $300 for leaving $5000 in for 6 months. I plan to try for 2 a year, and also have my fiance do the same, so we should get $1000-1200 per year for having $10,000 tied up at a time.

There is also a bank called Mango that pays 6% on up to $5k, but they have fees and require a direct deposit. After the fees, it ends up being a 5.2% yield. So I might switch to this if I can't find good bonuses.

http://thefinancebuff.com/mango-prepaid-card-6-apy-savings-account-a-hidden-gem.html

Eric · « **Reply #44 on:** February 19, 2015, 06:20:12 PM »

Quote from: violetvixen on February 16, 2015, 08:51:45 PM

Quote from: MustachianAccountant on February 13, 2015, 09:07:45 AM
Quote from: Kris on February 13, 2015, 07:04:44 AM
What Vanguard bond fund do you guys like?

I'm a fan of VTI - Intermediate Corp Bond fund.

Why do you favor this fund? Is it a bad idea to use a bond fund as an emergency fund? Is it liquid enough or do I still need 2-3 months in the bank?

As noted above, VTI is not a bond fund. It's the ETF of the Total US Stock Market. But speaking of bond funds in general, it's not really the liquidity that's an issue. You can sell off any fund and have the proceeds in a day or two. It's the volatility that you want to be wary of. While bond funds are (generally) less volatile than stock funds, they can and do lose value. So make sure that you're in a position to accept the possibility that the fund will have less money when you need it than what you initially deposited.

Quote from: violetvixen on February 18, 2015, 10:35:00 PM

What about keeping it in a Roth IRA? Can't you take out contributions to that at any time without penalty?

Yes, you can take Roth IRA contributions (but not earnings) out at anytime. However, since Roth space is valuable (tax free growth forever!) and pretty limited, you want to use this as more of a last resort. If you're in the same fiscal year, I believe you can re-deposit later, but if you take out contributions from 2013 or 2014 they're gone forever. I'd consider my Roth to be the back up to my back up to my emergency fund.

mochila · « **Reply #45 on:** February 20, 2015, 05:08:08 AM »

I keep a year's worth of expenses (yeah, way too much) in a horrible Discover Premium Savings account that has fluctuated between 0.85% and 0.90% APY for years. I had first opened the account for a targeted sign-on bonus in 2010, when Discover was offering the highest rate anywhere (1.90% or 2%--I can't remember, and it makes a negligible difference). What I like about this account, however, is that it takes so long to extricate funds from it.

The rest is in a taxable Vanguard account, now worth almost four years' worth of expenses, or a down payment on a fixer-upper in my overpriced "historic" neighborhood. Like some of you, I also have more than twice my annual salary in credit.

YoungInvestor · « **Reply #46 on:** February 20, 2015, 05:17:40 AM »

I only keep enough money for monthly expenses and some buffer. I rent an apartment so unexpected upkeep expenses are basically impossible, I don't have kids, my job provides insurance for health conditions and my severance would cover expenses for a few months in a layoff.

I may push it to two months, but I hate seeing money lying around and doing nothing.

chasesfish · « **Reply #47 on:** February 20, 2015, 05:21:13 AM »

I've always kept mine as available balance on a home equity line of credit.

I also have a taxable brokerage account I could liquidate.

I can't see any sense in having zero interest savings while paying 3%+ on a house.

boarder42 · « **Reply #48 on:** February 20, 2015, 06:22:50 AM »

taxable brokerage accounts plus Roth IRA contributions that are over 5 years old if i have to tap it.

the thought of a EF is good at the beginning i guess but i see it as a waste if you're putting even 1 month living expenses EXTRA in an account that actually loses you money with inflation... once your maxing all tax advantage and you are into the taxable funds... that becomes your safety net.

The BUT WHAT IF THE MARKET CRASHES AND I HAVE ABSOLUTELY NOTHING LEFT ... issue is a terrible fear that is highly unlikely AND IF ... IF it does happen. This country will in such a state of turmoil it wont matter that you have 10-20k sitting in a savings account. b/c money wont matter.

boarder42 · « **Reply #49 on:** February 20, 2015, 06:27:45 AM »

i guess i just dont understand what these crisis's people have that are emergencies and they need immediate access to cash are. when you're saving 50-60% of your take home pay a month. if the fridge breaks or the car needs some maintenance etc. you should be able to adjust your savings/put it on a credit card and then get your money out of your brokerage accounts. and if push really comes to shove you can get money out of accounts for large medical expenses without penalties.

but does anyone have an example of why you need this account and what the benefit really is?

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Author Topic: Emergency Fund--Where Do You Keep It? (Read 22476 times)