Where do you save?

[CarolusP]

Hey everyone! I'm new to the site, love the philosophy and I'm eager to learn.

This is probably a pretty basic question, but where do you put your money to save it? I'm not talking about investments, but rather the savings that you need to be risk-free and easily available (emergency funds, savings for car purchase, etc).

I've recently opened up an Ally Savings account because of their nice (relatively speaking) return rates (1.15% as of this writing). However, I still cringe that this rate is well below inflation, and the cash has to essentially sit idle until it's needed.

[Milkshake]

We do 6 months cash sitting combined in checking/savings. About 2 months in checking and 4 months in savings, earning about 1%. The checking is so fluid, sometimes we drop to a few hundred, sometimes a few thousand. Savings pretty much always stays at 4 months worth, unless a big purchase comes. Any extra cash over the combined 6 months gets siphoned off to investments.

Some people says 6 months is way too much, others say they have 2 years in cash. It all depends on your comfort level.

Edit to clarify: 6 months of expenses. So all income could stop right now and we could continue living the current lifestyle for 6 months.

[MDM]

CarolusP, welcome to the forum.

It might help to consider the e-fund more as insurance than as an investment, and whatever you might lose to inflation as your annual "insurance premium."

See also Emergency fund - Bogleheads and Investment Order for some related discussion.

[rugorak]

Ally is where I am too. As they said don't worry too much about it vs inflation as it really is a self funded insurance policy. Just think about it this way. For normal insurance you pay and if nothing ever happens they don't give you money for paying them. With this even if you are *only* getting 1.15% at least you are getting paid. Plus you just fund it up to a number and then it sits there at least working for you somewhat.

[jc4]

No savings at all. Not even an account. Our checking has a few hunded to to 1500 (before we pay rent) at a time.

[boarder42]

you'll also find that you will reach a point at which your assets are enough that you wont need the insurance safety net of an E Fund and can get all those little green soldiers working for you.  once you've built a larger income and a sizeable taxable stache(after you've maxed all tax advantaged first) you'll find little need for an emergency fund. 

[yachi]

you'll also find that you will reach a point at which your assets are enough that you wont need the insurance safety net of an E Fund and can get all those little green soldiers working for you.  once you've built a larger income and a sizeable taxable stache(after you've maxed all tax advantaged first) you'll find little need for an emergency fund.

+1. 
I think about my checking accounts (1 for rental property expenses, 1 for everything else) and savings accounts as operating accounts with little more than 2 months expenses just so I don't have to balance a checkbook.  I have a taxable investment account with a year's expenses or more.  It's invested all in stocks.