Author Topic: Worth it to move my Emergency Fund?  (Read 6786 times)

engineerjourney

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Worth it to move my Emergency Fund?
« on: January 11, 2014, 12:33:23 PM »
How do you decide when the effort is worth it for creating even more accounts to keep track of?  Our emergency fund is $25,000.  Right now its in our credit union savings account getting 0.05% (wohoo), so about $12.5/year.  SO LAME.  But, its really easy to get money in and out of that location and we have some $$ also in there for our furnace replacement fund.  I also transfer extra from our checking every month over to then hopefully invest.  I was thinking of opening a Capital One 360 account to be able to show the split in my saving pots but some of those pots don't seem worth moving anymore.  But if I move the $30,000 (that I shouldn't be touching at a drop of a hat) to say Capital One 360 savings then I get 0.75% interest.  So $187.5/year or $175 more a year than currently leaving it in my savings account.  Should this be a no-brainer?  Even though it gives me yet another account?  When it comes to where our money is we already have two 401K, two Roths, two HSAs, a taxable account, and a checking/savings account..  Savings account interest rates are so awful that I don't want to get tempted into 'chasing' the rates. 

thelamb

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Re: Worth it to move my Emergency Fund?
« Reply #1 on: January 11, 2014, 12:44:32 PM »
I personally don't get emergency funds, in a pure savings account sense.  I would argue you'd be better sticking all of that in with the rest of your taxable investments and start earning closer to 5%, if not more.  If an emergency comes up, you can quickly sell and transfer, usually in under a business week. 

Doing some back of the napkin math, if you put $25k in some sort of index fund and it got 5%, in one year you'd earn $1250.  If for some reason, you had to sell it all off and pay the taxes on the gains, you'd be paying less than $400 in taxes, still netting you $800, which is way better than the $12 or $175 you're getting in a savings account. 

I'm sure my math is way off but the general principle should hold true.  If you're worried about a week being too long, wouldn't a couple grand suffice until the rest could be sold and transferred?  I would keep a couple extra in my checking, kill the savings, and invest the rest. 

geekette

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Re: Worth it to move my Emergency Fund?
« Reply #2 on: January 11, 2014, 12:47:50 PM »
Some may not want an emergency fund, but I'm a fan.  Sure, an index fund can go up quicker, but it can also come crashing down.

I have a couple accounts at Capital One, and moving money is quick.  A referral (pick me! pick me!) means extra cash up front.

engineerjourney

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Re: Worth it to move my Emergency Fund?
« Reply #3 on: January 11, 2014, 12:54:45 PM »
Lets not turn this into another emergency fund vs no emergency fund discussion :-)  My husband and I work at the same company and while its not likely we would lose either job, if we do, because of the industry we work in, I can almost guarantee a crash of the market at the same time.  So for us, an emergency fund makes us sleep better :-)  Thanks for the input so far!

geekette, its good to hear that moving money is quick for you.  Doing research it was hard to tell how linking up accounts would work with the speed of moving money. 

thelamb

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Re: Worth it to move my Emergency Fund?
« Reply #4 on: January 11, 2014, 01:04:56 PM »
Yeah, I shouldn't have gone there. :)  geekette makes a great point.  The market collapse in 2008/2009 seems so long ago that it's easy to forget that can happen. 

The other point made I agree with; I've generally found it super easy and relatively quick to do transfers.  And who knows, with the federal reserve planning to start slowing their quantitative easing, the interest rates could start to climb back up into the 2's, 3's, or even 4's. 

thepokercab

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Re: Worth it to move my Emergency Fund?
« Reply #5 on: January 11, 2014, 01:05:08 PM »
For me an "emergency" would most likely be job loss.  And my guess is that there is a strong correlation between a downtown in the market and the chance that i'd lose my job.  Hence, why I decide to keep a few months of cash in a savings account as opposed to having it tied up in the market.  The absolute worst case scenario would be job loss + selling off investments while the market is going down.  Ouch.     

I also hate thinking about these dollars sitting on the beach doing nothing but in the end I just think of it as an insurance policy.  The "premium" i'm paying to have this insurance is the inflation + the gains it could be making in the market. 

Now if I had almost zero worry that I would lose my job, then I would probably ditch this "insurance" and put the money into the market. Just like I would ditch any insurance if there was no chance of having to rely on it.   

geekette

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Re: Worth it to move my Emergency Fund?
« Reply #6 on: January 11, 2014, 01:10:00 PM »
When I say quick money transfers, I really mean a couple days (this isn't Europe, where money moves in a flash).

But you can get a linked Capital One checking account (again, pick me! pick me!) and an ATM card for insta-cash.  It worked great in Italy, with no exchange fee, either.

We started with Ing Direct (now Capital One) back when we actually WERE getting 4%.  Those were the days...

needmyfi

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Re: Worth it to move my Emergency Fund?
« Reply #7 on: January 11, 2014, 01:16:41 PM »
For what its worth, I moved to Ing, now Capital One 360 for a similar reason (wish they were currently offering the "refer a friend" bonus) ;).  but Geekette beat me to the punch anyway. LOVE them-won't say that about any other bank I've had.  Unless you are going to make $175 bucks in the next 1/2 hour doing something else-GO FOR IT! We now have several accounts with them, investment, Checking, IRA,s and car loan.  No face punches on car loan-we got an insurance pay out and salvage value of a little over  $6 K will move it from savings into IRA soon and Capital One gave us the car loan for 1.5%

engineerjourney

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Re: Worth it to move my Emergency Fund?
« Reply #8 on: January 12, 2014, 12:39:50 AM »
Thanks for all the input!  It makes me think that it is worth it to move some of the savings money over to take advantage of the better rate. 

Wanderer

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Re: Worth it to move my Emergency Fund?
« Reply #9 on: January 12, 2014, 05:09:54 AM »
I have a 360 account and have had one since they were ING and giving 4.5%.  *sob*  What do you mean about moving some of the money?  I'd move the whole chunk!  If you have a cushion in your checking account or a credit card, there's no need to keep much extra locally.  It takes a few days for transactions to finalize, but I have never had a situation where I needed to withdraw the money and have it available that second.  And, like geekette says, getting a checking account with them would make the money immediately available.   

TomTX

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Re: Worth it to move my Emergency Fund?
« Reply #10 on: January 12, 2014, 06:18:34 AM »
When I say quick money transfers, I really mean a couple days (this isn't Europe, where money moves in a flash).

But you can get a linked Capital One checking account (again, pick me! pick me!) and an ATM card for insta-cash.  It worked great in Italy, with no exchange fee, either.


Same, however:

...When I need more than the ATM limit, I just go inside my local credit union and have them pull the money out of ING/360 using my ING/360 ATM card. There is no limit when I provide ID (I have an account) - I have done this a couple of times to pay property taxes.

153

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Re: Worth it to move my Emergency Fund?
« Reply #11 on: January 12, 2014, 06:25:07 AM »
Just a plug for AmEx personal savings! Rate is 0.85%. I know you said you aren't chasing yield, but why not maximize return on your efforts.

ender

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Re: Worth it to move my Emergency Fund?
« Reply #12 on: January 12, 2014, 08:08:32 AM »
One strategy I've heard of to balance the "low rates vs security" tradeoff is to basically double the amount in your emergency fund when putting it into more volatile investments like stocks. Depending on your need for security you might even increase by a larger factor.

Then, even if the market drops 50%, you still have the correct amount of money in your account to cover emergencies.

In your case basically allocating $50k to emergency fund but investing it.

engineerjourney

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Re: Worth it to move my Emergency Fund?
« Reply #13 on: January 12, 2014, 09:55:56 AM »
One strategy I've heard of to balance the "low rates vs security" tradeoff is to basically double the amount in your emergency fund when putting it into more volatile investments like stocks. Depending on your need for security you might even increase by a larger factor.

Then, even if the market drops 50%, you still have the correct amount of money in your account to cover emergencies.

In your case basically allocating $50k to emergency fund but investing it.

hmm, that is interesting, I have never heard of this idea before.  I shall have to ponder further.  :-)

engineerjourney

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Re: Worth it to move my Emergency Fund?
« Reply #14 on: January 14, 2014, 02:28:35 PM »
I think I am going to open a 360 account so I can split up the emergency fund and things like insurance premiums which I do the lump sum for.  It will help me sleep knowing those things are accounted for.
A referral (pick me! pick me!) means extra cash up front.

Post your referral here or PM me please geekette! :-) 

geekette

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Re: Worth it to move my Emergency Fund?
« Reply #15 on: January 14, 2014, 09:49:35 PM »
Yay!  And thanks!

My referral link. All are welcome to use it - or I suppose we could start a chain a la YNAB or Ting.

engineerjourney

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Re: Worth it to move my Emergency Fund?
« Reply #16 on: January 15, 2014, 04:25:58 PM »
Thanks geekette!  I used it and opened a savings account for my emergency fund.  Hopefully you will get a bonus soon! 

Here is my referral link if anyone reading this wants to open a capital one account:
https://r.capitalone360.com/TphFEEwP3Z

eman resu

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Re: Worth it to move my Emergency Fund?
« Reply #17 on: January 15, 2014, 05:31:35 PM »
One strategy I've heard of to balance the "low rates vs security" tradeoff is to basically double the amount in your emergency fund when putting it into more volatile investments like stocks. Depending on your need for security you might even increase by a larger factor.

Then, even if the market drops 50%, you still have the correct amount of money in your account to cover emergencies.

In your case basically allocating $50k to emergency fund but investing it.
Huh, hadn't considered this before. On first blush I was really intrigued; but, the more I consider, the more it seems a mental exercise to convince oneself that paying $X for a $X/2 emergency might be OK. The returns, I know... but but but... 

I opened a cap 360 a few weeks ago. Shucks, I should've given someone a referral bonus!

Thegoblinchief

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Re: Worth it to move my Emergency Fund?
« Reply #18 on: January 15, 2014, 05:39:42 PM »
We started with Ing Direct (now Capital One) back when we actually WERE getting 4%.  Those were the days...

4%?? I used to get 6%, haha.

Miamoo

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Re: Worth it to move my Emergency Fund?
« Reply #19 on: January 17, 2014, 07:40:39 AM »
But they do still have the refer a friend.

https://r.capitalone360.com/M7FUuai4VM

Here's my link (please?) in case geekette goes over the limit and hits the $1,000.00.  Good luck everybody!

$200k

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Re: Worth it to move my Emergency Fund?
« Reply #20 on: January 17, 2014, 09:04:36 AM »
I am surprised that no one mentioned ally bank as an alternative to capital one.  I've had both for a while now and prefer ally.  Slightly better interest rates, free checks up front, up to 6 free atm withdraws per month from ANY atm.  Another slight annoyance re capital one.  Instead of a standard password for login, you choose a six digit number code.  This is different from your PIN number. 

tomq04

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Re: Worth it to move my Emergency Fund?
« Reply #21 on: January 17, 2014, 11:25:35 AM »
Have referral for ally?

NinetyFour

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Re: Worth it to move my Emergency Fund?
« Reply #22 on: March 02, 2014, 08:06:32 PM »
Here's my referral link for Capitol One, if anyone is interested.  You would get $10 - $20 (I'm not sure which) and you'd need to open your account with at least $250.  I would get get $20.

Thanks in advance!

https://r.capitalone360.com/RT88UFGSfy