Author Topic: Need advice on where to store my emergency fund  (Read 7614 times)

RedMaple

  • Stubble
  • **
  • Posts: 130
  • Age: 35
  • Location: NYC
Need advice on where to store my emergency fund
« on: June 30, 2013, 09:37:16 AM »
I have 1 bank (bank A) that I keep my savings and chequing account. Everything gets paid out of that chequing account. High yield savings is at .5% if I keep over $10k. I just opened up a savings account (bank B) that pays a better rate at .85%. My issue is allocating between the two banques.

Question: should I keep my emergency fund money in bank A - because moving money to the chequing account will be super easy, the downfall would be my interest rate at .5%; or should I keep my emergency fund money in bank B where my interest rate is .85%, but it will take a significant amount of time to actually get the money into bank A. (bank B will have to send a check to me, that I will have to deposit into bank A - I imagine this process will take at least a week).

Ultimately, I guess I am asking - if an emergency occurs, how much time would I have? If anything happens, I would normally charge it to my credit card which I would pay the following month - giving me plenty of time to shuffle my money around. But in what circumstances would I need a large chunk of money right now this very second? Extortion?



arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27911
  • Age: -999
  • Location: Traveling the World
Re: Need advice on where to store my emergency fund
« Reply #1 on: June 30, 2013, 09:40:35 AM »
I use SmartyPig.com, which is giving 1% right now.  You wait a few days for it to transfer, but as you point out, most "emergencies" you have a month+ to pay for.

(Which is why it may not be needed at all if you cash flow enough.)

I personally wouldn't worry about having it accessible within 20 minutes.  I've never once needed that much cash, quickly.  Even if purchasing something large (used car, for example), you have time to plan out the purchase and transfer the money.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

OzzieandHarriet

  • Bristles
  • ***
  • Posts: 272
Re: Need advice on where to store my emergency fund
« Reply #2 on: June 30, 2013, 10:10:05 AM »
But in what circumstances would I need a large chunk of money right now this very second? Extortion?

Depends on what kind of company you keep!

Rebecca Stapler

  • Pencil Stache
  • ****
  • Posts: 907
    • Stapler Confessions
Re: Need advice on where to store my emergency fund
« Reply #3 on: June 30, 2013, 10:22:40 AM »
Even after a year of underemployment, I didn't access my emergency fund. And even then, if something were going to be a financial "emergency," 99.9% of the time I would know it about a month ahead of time.

The only close call I had was when ING incorrectly processed my rent check and bounced it back to my LL. The LL wanted a cashier's check immediately and I didn't have a brick and mortar bank to get it from, but of course an eviction takes a while so the LL didn't have much of a choice than to accept my assurance that I was putting a paper check in the mail that moment, that ING acknowledged that it fucked up, and that I was paying the bounced check fee (which ING reimbursed me for).

Otherwise, any other big expense that comes down the road can be paid for with my credit card, and then I have 30 days + to figure out how to pay that.

The only other scenario that comes to mind, where you would need $$ immediately, is if you need to post bail. What's the likelihood of that?!

All that is to say that you should put your E Fund wherever it will earn the most $$ in your risk comfort level. If it takes a while to get at the money, all the better for your psychological obstacle to using that money for anything less than a true emergency.

RedMaple

  • Stubble
  • **
  • Posts: 130
  • Age: 35
  • Location: NYC
Re: Need advice on where to store my emergency fund
« Reply #4 on: June 30, 2013, 10:32:58 AM »
Even after a year of underemployment, I didn't access my emergency fund. And even then, if something were going to be a financial "emergency," 99.9% of the time I would know it about a month ahead of time.

The only close call I had was when ING incorrectly processed my rent check and bounced it back to my LL. The LL wanted a cashier's check immediately and I didn't have a brick and mortar bank to get it from, but of course an eviction takes a while so the LL didn't have much of a choice than to accept my assurance that I was putting a paper check in the mail that moment, that ING acknowledged that it fucked up, and that I was paying the bounced check fee (which ING reimbursed me for).

Otherwise, any other big expense that comes down the road can be paid for with my credit card, and then I have 30 days + to figure out how to pay that.

The only other scenario that comes to mind, where you would need $$ immediately, is if you need to post bail. What's the likelihood of that?!

All that is to say that you should put your E Fund wherever it will earn the most $$ in your risk comfort level. If it takes a while to get at the money, all the better for your psychological obstacle to using that money for anything less than a true emergency.

How do you normally have your money set up? As in, does your salary go into your chequing account and then you delegate the savings portion to different accounts (after you pay all of your expenses)?

innkeeper77

  • Stubble
  • **
  • Posts: 238
Re: Need advice on where to store my emergency fund
« Reply #5 on: June 30, 2013, 01:02:22 PM »

The only other scenario that comes to mind, where you would need $$ immediately, is if you need to post bail. What's the likelihood of that?!


I have actually had to do this- for a friend who was actually arrested for something she didn't do- because the police force got their information wrong. It was a whole huge issue, but eventually it was expunged, and bail money was returned (because they technically illegally detained them due to improper fact checking) (This was all done out of court as the police were obviously wrong and wanted to keep themselves for being sued) - while this is unlikely, posting bail even for a law abiding citizen is a possibility. Certain jurisdictions are more known for doing this sort of thing than others. After this event we did some news  checking and found out that this occurrence was far more common than it should have been.. a hint: decently developed Midwestern area.

The bail wasn't much, but I was very glad to have a few hundred dollars easily accesible.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27911
  • Age: -999
  • Location: Traveling the World
Re: Need advice on where to store my emergency fund
« Reply #6 on: June 30, 2013, 01:11:58 PM »
The bail wasn't much, but I was very glad to have a few hundred dollars easily accesible.

Yeah, I'd always have 1 mo. expenses in my checking account.  I wouldn't count that as an emergency fund.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Joet

  • Guest
Re: Need advice on where to store my emergency fund
« Reply #7 on: June 30, 2013, 02:04:36 PM »
I personally like:

I/EE-bonds (watch out for their 1-year aging requirement, you have to ease into these)
Laddered high yielding CD's (some of these also have an aging requirement)
High Yield checking (yes, those annoying 8-or-so debits/monthly required thing)
Money Market/Normal checking account

I bonds of course match CPI posted inflation, EE bonds will pay 3.56% APY risk-free (if held 20 yrs), CDs in the 5-7 year range (you can cancel these early) you can find 3% or so these days, HY checking around 2.5% or so is typical (check fatwallet forums) and the standard MM the yield is like 0.0 heh. Maybe 0.1 if you're lucky!

fiveoclockshadow

  • Stubble
  • **
  • Posts: 216
  • Location: Baltimore
Re: Need advice on where to store my emergency fund
« Reply #8 on: June 30, 2013, 03:27:34 PM »
EE bonds will pay 3.56% APY risk-free (if held 20 yrs)

I feel like I'm missing something here, www.tresurydirect.gov says EE bonds bought now yield 0.2% fixed rate for twenty years.  Not very compelling.  Where does 3.56% come from?


Joet

  • Guest
Re: Need advice on where to store my emergency fund
« Reply #9 on: July 01, 2013, 12:32:58 AM »
minimum doubleing clause if you read a little further into the terms, not too long ago it was 17 yrs! currently, alas... 20 yrs. They perform a true-up at the 20 yr point

Khan

  • Pencil Stache
  • ****
  • Posts: 616
Re: Need advice on where to store my emergency fund
« Reply #10 on: July 01, 2013, 02:05:00 AM »
Dunno if you've seen this topic Red,
http://www.mrmoneymustache.com/forum/welcome-to-the-forum/emergency-funds-what-do-you-do/

For me, I float about a month's expenses in my savings account on top of my paycheck to paycheck in checking, so I'm not overly concerned with yield on it. For anything else, I have my Visa with ~5k limit, a cadillac health plan, and I'm willing to take any losses necessary on my investments if I have to to get access to that money.

fiveoclockshadow

  • Stubble
  • **
  • Posts: 216
  • Location: Baltimore
Re: Need advice on where to store my emergency fund
« Reply #11 on: July 01, 2013, 04:44:48 AM »
minimum doubleing clause if you read a little further into the terms, not too long ago it was 17 yrs! currently, alas... 20 yrs. They perform a true-up at the 20 yr point

Great, thanks for clarifying!  I hadn't seen that clause before. 

So a poor savings vehicle (by which I mean one you draw on frequently), but as a always liquid truly "emergency" fund that you hope to never draw on an interesting choice.  OK return if you hold it "forever" and fully protected principle at least if you do have to draw on it.

Rebecca Stapler

  • Pencil Stache
  • ****
  • Posts: 907
    • Stapler Confessions
Re: Need advice on where to store my emergency fund
« Reply #12 on: July 01, 2013, 07:49:36 AM »

How do you normally have your money set up? As in, does your salary go into your chequing account and then you delegate the savings portion to different accounts (after you pay all of your expenses)?

That's how I do it. Although, at this point I'm paying down SL debt so nothing is going into savings.

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: Need advice on where to store my emergency fund
« Reply #13 on: July 01, 2013, 08:48:18 AM »
If you don't mind a little rigmarole, you can earn 4.8% on $5,000 with Mango Money. 6% APY compounded every month minus $5 monthly fee. I opened my account a few months ago and the interest reliably shows up on the last day of the month. I ACH $50 from my credit union to meet the direct deposit requirement. Bogleheads turned me on to this. There are other prepaid cards with high-yield savings accounts attached...

If you want a more traditional bank and have a BBVA Compass nearby I've heard really good things about their Build My Savings account. You can open multiple accounts. Play around with the calculator to figure out how to maximize your earnings. The Finance Buff taught me about this one.

.22guy

  • Stubble
  • **
  • Posts: 131
Re: Need advice on where to store my emergency fund
« Reply #14 on: July 01, 2013, 10:02:51 AM »
If you don't mind a little rigmarole, you can earn 4.8% on $5,000 with Mango Money. 6% APY compounded every month minus $5 monthly fee. I opened my account a few months ago and the interest reliably shows up on the last day of the month. I ACH $50 from my credit union to meet the direct deposit requirement. Bogleheads turned me on to this. There are other prepaid cards with high-yield savings accounts attached...

If you want a more traditional bank and have a BBVA Compass nearby I've heard really good things about their Build My Savings account. You can open multiple accounts. Play around with the calculator to figure out how to maximize your earnings. The Finance Buff taught me about this one.

That sounds pretty good, can you tell me more about the ACH from your credit union?  Do you have any idea how I could set that up with my regular bank?

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: Need advice on where to store my emergency fund
« Reply #15 on: July 01, 2013, 10:23:06 AM »
That sounds pretty good, can you tell me more about the ACH from your credit union?  Do you have any idea how I could set that up with my regular bank?

It depends on which bank/CU you use. My CU (Alliant) makes it very easy to link an external account to both pull money from and push money to. The details provided for direct deposit to the prepaid card are the same that are used for the ACH transfers. I suggest you ask your bank and/or get a new one if your current bank won't accommodate.

If you need a new bank, you should take advantage of CapitalOne 360's savings sale and get $100 for a new checking account. From personal experience, this account makes external links and transfers very easy. This bank used to be ING Direct and I was wary of CapitalOne's takeover, but nothing has changed and it's still a pretty great account to have.

.22guy

  • Stubble
  • **
  • Posts: 131
Re: Need advice on where to store my emergency fund
« Reply #16 on: July 01, 2013, 02:22:16 PM »
That sounds pretty good, can you tell me more about the ACH from your credit union?  Do you have any idea how I could set that up with my regular bank?

It depends on which bank/CU you use. My CU (Alliant) makes it very easy to link an external account to both pull money from and push money to. The details provided for direct deposit to the prepaid card are the same that are used for the ACH transfers. I suggest you ask your bank and/or get a new one if your current bank won't accommodate.

If you need a new bank, you should take advantage of CapitalOne 360's savings sale and get $100 for a new checking account. From personal experience, this account makes external links and transfers very easy. This bank used to be ING Direct and I was wary of CapitalOne's takeover, but nothing has changed and it's still a pretty great account to have.

Ok, thanks for the further info.  Is it as simple as just sending some money to the account each month?  I currently bank with Rabobank and push money each month to Barclays online savings.  All I had to do for that is give Barclay my Rabobank routing number from a check.  Is it the same with Mango?

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: Need advice on where to store my emergency fund
« Reply #17 on: July 01, 2013, 02:27:22 PM »
Is it the same with Mango?

Pretty much. You need the account number and the routing number. Those can be found on the direct deposit form after you open a Mango account. Do your research. You need to deposit $50 per month to activate the 6% interest rate on savings. Note that this only becomes a better deal than an online savings account when you have at least $1,200 in the online savings account, due to the $5 monthly fee.

.22guy

  • Stubble
  • **
  • Posts: 131
Re: Need advice on where to store my emergency fund
« Reply #18 on: July 01, 2013, 04:46:23 PM »
Thanks madage!