Author Topic: Unemployed husband and large emergency fund  (Read 1570 times)

Lanthiriel

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Unemployed husband and large emergency fund
« on: August 19, 2016, 06:33:56 PM »
My husband was laid off from a full-time permanent job in May, and was lucky enough to land a good seasonal job for the summer. We are anticipating that he will be let go again sometime in October. By that time we will have a $15k emergency fund (monthly expenses are about $3200/mo), and should be able to add another $5k to it before the end of the year by saving his unemployment and my end of year bonus. By December 31, we should have a good six months of expenses saved up.

My income covers our basic monthly expenses, but doesn't go much farther. Therefore, even if for some reason he is still out of a job by the time unemployment runs out, we shouldn't have to dip into our emergency fund except for, you know, emergencies.

With this in mind, where would you park that $20k? Some ideas...

25% at the credit union. I'm very tempted to keep $5k on hand at all times in our credit union savings account because it makes my heart warm. We have plenty of available credit in the form of credit cards, but for some reason having immediate cash available seems like a good idea anyway. Unfortunately, my rate of return is a stellar 0.1%. As such, I am willing to be talked out of this.

Netspend. Netspend seems to have the highest interest rates around. It's my understanding that each person can have up to three accounts in their name, and they come with a 5% savings account for up to $5k apiece. I already opened one of these accounts and am depositing my $1/month to avoid the inactivity fee, but something about it just feels off. The web interface is a bit hard to use, and I've never heard of them before I opened the account after hearing about them here. It makes me a little nervous to give them $5k. Am I being silly?

Low risk investments. I could also put the money in a Vanguard account with a high bond to stock ratio. This feels like a low risk, low reward situation, and may result in taxable income. Pros/cons?

Roth IRAs. I could take $11,000 and open a Roth apiece for my husband and myself and invest it like I am our 401ks, largely in Target Retirement funds. Helpful because there's no early withdrawal penalty, but maybe too risky? Or do I combine this with my thought above and open Roth IRA accounts with low risk investments? And what would you do with the other $9k?

Regular "high interest" savings account. I could plop it all in a 1% account with a well known bank and just be happy I have the money available.

Any other options? What would you do in my situation where you have an increased from usual likelihood of using this money, but still probably won't need to touch it. If it helps, I also keep a $1k buffer in my checking account that I'm not counting as part of the emergency fund.


LeRainDrop

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Re: Unemployed husband and large emergency fund
« Reply #1 on: August 19, 2016, 06:45:04 PM »
I like what I do, so I would recommend that -- I keep a similarly-sized emergency fund at Ally Bank.  Most of this money is in a savings account, but I also have some in a money market and some in a checking account.  (Honestly, I also have a couple CDs left there since someone convinced me to do CD ladders, but I haven't liked that method in practice, so as they mature, I cash them out instead of renewing them.)  With checking, you get free checks, free bill-pay, and an ATM card, where Ally refunds your ATM fees.  Since you have the ATM card and can immediately transfer funds between any of these Ally accounts, accessing the emergency fund can be done without any delay if needed.

katsiki

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Re: Unemployed husband and large emergency fund
« Reply #2 on: August 19, 2016, 07:03:30 PM »
I would not invest it since you may need it in the short-term.  I would try to find a bank or CU in your area that offers "Kasasa" checking.  It's high-interest, usually around 3-4%.  It requires a few hoops but not bad.  Mine is 3.24% and has been for a couple of years.  Here is an article on it: http://www.thepennyhoarder.com/want-to-earn-3-or-more-in-interest-on-your-checking-account/.

(Kasasa search link is dead, so you might have to google Kasasa + your location to find one).

Also, I wanted to mentioned that Netspend is now capped at $1K per account.  Not sure I would bother with it.

Good luck!

letired

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Re: Unemployed husband and large emergency fund
« Reply #3 on: August 19, 2016, 07:48:13 PM »
Heads up, Netspend reduced the balance that gets 5% to 1k. You might want to move some of that money to a savings account that'll get at least 1%. Or open more accounts.