Author Topic: Emergancy Fund  (Read 7994 times)

ephillipsme

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Emergancy Fund
« on: June 11, 2014, 10:39:27 AM »
So we have a deep savings or emergency fund of about 15k.  Currently it's in a local bank money market earning .1%.  I have looked around the local area for banks and CU and not much better deals.  I am hesitant to move my emergency fund to a internet only bank to get .7 or .85%.  One of my reasons is in a true emergency I would like to have a branch to go to (old school I know).  I keep coming back to the difference in interest though and am torn.  What are others experience with internet only banks suck as Ally?

BuzzardsBay

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Re: Emergancy Fund
« Reply #1 on: June 11, 2014, 11:01:50 AM »
I have the same amount in a money market account with the local credit union.  I like the convenience and there's something about being able to just grab the check book for it if I need to.

I did use ING several years back when I was saving up that amount.  I liked it and it was easy to deposit into the account online.  I just had the savings account with them though so waiting for it to transfer into my regular bank would have taken a few days. 

I see the emergency fund as a security blanket not as a way to earn interest.  My investments are used to make money.  The emergency fund lets me sleep at night.  I'm single so I have a one income household and I want to make sure I can take care of anything that happens when it happens.  (Like last month when the hot water heater sprung a leak and I ended up with 4 inches of water in the basement.  I just wrote a check for my plumber after he took care of everything.)

It's only 15k.  You're not going to earn that much in the grand scheme of things even if you find an account paying 2 or 3 percent. 

FrugalSpendthrift

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Re: Emergancy Fund
« Reply #2 on: June 11, 2014, 11:06:25 AM »
I can't think of an emergency that would force me to run down to the local bank branch and withdrawal tons of cash.  The emergencies that I am prepping for would probably be weathered with a credit card and the time to transfer from an internet bank to my checking account isn't really a big deal.

nordlead

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Re: Emergancy Fund
« Reply #3 on: June 11, 2014, 11:30:19 AM »
I have an Ally checking account (they will mail you free personal checks), and an Ally savings account.

With Ally you can get whatever the max is from an ATM as fast as it takes to get to an ATM. You can also get a checking account, transfer the money that day, and write a personal check.

Outside of that, I can't think of why I'd need that much cash within 2 days (transfer time, plus go to a local bank). They'll even mail you a bank check for free if you want, but I'm not sure how long that takes.

FYI, by leaving the money where it is you are leaving $126 on the table. Honestly, it isn't that much, but it was enough for me to move as I was getting really frustrated with my bank (First Niagara, who bought out HSBC who I actually liked).

rmendpara

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Re: Emergancy Fund
« Reply #4 on: June 11, 2014, 11:51:38 AM »
So we have a deep savings or emergency fund of about 15k.  Currently it's in a local bank money market earning .1%.  I have looked around the local area for banks and CU and not much better deals.  I am hesitant to move my emergency fund to a internet only bank to get .7 or .85%.  One of my reasons is in a true emergency I would like to have a branch to go to (old school I know).  I keep coming back to the difference in interest though and am torn.  What are others experience with internet only banks suck as Ally?

I don't know about other online banks, but Capital One 360 (formerly ING Direct), will provide a debit card which you can use to withdraw cash from any ATM (in-network ATMs are free). I'm not sure what you want to be able to go into an actual bank for, but if that makes you feel better then it's fine to stay with them. You can also transfer to another bank account via ACH transfer, but that takes 2 days to clear.

Your emergency fund, after all, is for emergencies. I wouldn't worry about 0.1% vs 0.75%. It's not a big deal. For $15k, the difference is less than $100, so any option you choose, if less convenient, should net your more than $100 compared to what you have now.

Mr. FI

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Re: Emergancy Fund
« Reply #5 on: June 13, 2014, 02:38:02 PM »
I can't think of an emergency that would force me to run down to the local bank branch and withdrawal tons of cash.  The emergencies that I am prepping for would probably be weathered with a credit card and the time to transfer from an internet bank to my checking account isn't really a big deal.

Exactly. If you have good credit, you could probably open a credit card with a limit of $10,000-$15,000 (easier than you think). That would cover any short term emergency and if you put your money in an online bank (like GE Capital) their transfers only take 2 business days. I know the arugment is that there isn't much of a difference in interest rates, but for me, every penny matters. Might as well make your dollars go as far as they can!

Also, banks are not open on Sundays, holidays, after 6 on weekdays and after 4 pm on Saturdays (some even earlier) so unless you have an emergency that occurs between 9 am - 6 pm on a weekday, you're out of luck my friend.

chucklesmcgee

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Re: Emergancy Fund
« Reply #6 on: June 13, 2014, 11:07:15 PM »
I can't think of an emergency that would force me to run down to the local bank branch and withdrawal tons of cash.  The emergencies that I am prepping for would probably be weathered with a credit card and the time to transfer from an internet bank to my checking account isn't really a big deal.

Having a large emergency fund in a savings bank account is for poor people. Mustachians who have built up a bit of a stache and are aiming towards ER don't need that. You get $30k or so in index funds in a regular brokerage account and you'll have more than enough to cover whatever emergency expenses you need in time. A credit card can cover anything in the 2-3 days it takes to sell and transfer that to a checking account.

surfhb

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Re: Emergancy Fund
« Reply #7 on: June 13, 2014, 11:44:59 PM »
I can't think of an emergency that would force me to run down to the local bank branch and withdrawal tons of cash.  The emergencies that I am prepping for would probably be weathered with a credit card and the time to transfer from an internet bank to my checking account isn't really a big deal.

Having a large emergency fund in a savings bank account is for poor people. Mustachians who have built up a bit of a stache and are aiming towards ER don't need that. You get $30k or so in index funds in a regular brokerage account and you'll have more than enough to cover whatever emergency expenses you need in time. A credit card can cover anything in the 2-3 days it takes to sell and transfer that to a checking account.

I dont agree.     Why bear risk to funds only needed for an emergency?    Eventually the market will take a dump.....Thats just when Murphy pokes his ugly head in the door :)   

Id stay $15K is a prudent amount to have in a emergency fund in case of job loss,  loss of vehicle, medical deductibles, major home repairs, ect    Everyones situation is different though   

Im with the OP on a brick and motar bank nearby..... the difference in percentages isnt a big deal. 
« Last Edit: June 13, 2014, 11:54:50 PM by surfhb »

FrugalSpendthrift

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Re: Emergancy Fund
« Reply #8 on: June 14, 2014, 10:32:18 AM »
Having a large emergency fund in a savings bank account is for poor people. Mustachians who have built up a bit of a stache and are aiming towards ER don't need that. You get $30k or so in index funds in a regular brokerage account and you'll have more than enough to cover whatever emergency expenses you need in time. A credit card can cover anything in the 2-3 days it takes to sell and transfer that to a checking account.
Im starting to think I'm better off keeping about $30k in an index fund instead of $15k in a savings account to cover any emergency.  That way you can still cover an emergency after a big market drop, but with the odds that you don't need to tap it, you can have much better returns.

NinetyFour

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Re: Emergancy Fund
« Reply #9 on: June 14, 2014, 11:13:06 AM »
I have about $1000 in my local banks, but the rest of my EF is in my Capitol One online bank.  Works well for me.  I really like Cap One.  I could probably get a slightly better interest rate somewhere else, but that's not a big deal.

It only takes 2 - 4 days (depending on weekends) to transfer $$ from Cap One to my local bank, and that's fine.

Here's my referral code, should the OP be interested in Cap One.  (If you use it, I think we both get some bonus $$.)

https://r.capitalone360.com/RT88UFGSfy

TomTX

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Re: Emergancy Fund
« Reply #10 on: June 14, 2014, 07:36:22 PM »
I don't know about other online banks, but Capital One 360 (formerly ING Direct), will provide a debit card which you can use to withdraw cash from any ATM (in-network ATMs are free). I'm not sure what you want to be able to go into an actual bank for, but if that makes you feel better then it's fine to stay with them. You can also transfer to another bank account via ACH transfer, but that takes 2 days to clear.

If you take your ING card to an actual bank, they can pull from ING and hand you cash, well above the ATM limits. Heck, there may be no limit other than your balance. I do this when it is time to pay property taxes - around $4,000.

I go in to the tax office and hand the clerk cash - the tax office charges 2-3% to use a credit card, and I'm not going to maintain a checkbook for one transaction a year.

slugline

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Re: Emergancy Fund
« Reply #11 on: June 14, 2014, 10:37:09 PM »
Once upon a time, Capital One 360 customer service was able to temporarily give me a higher $25K limit on a cash advance on their debit card. I was able use the higher limit to get a cashier's check at my local credit union branch on short notice.

FIreDrill

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Re: Emergancy Fund
« Reply #12 on: June 14, 2014, 10:53:01 PM »
I have an Ally Money Market Savings which has our Emergency fund in it.  Right now it earns .85% and I can access the money via check or debit card.  Transfers out of the account to my local credit union usually take 2-3 days.  I haven't had an issue with it yet but I'm thinking about moving it to an index fund if I could bump it up to 30k.  I would prob do a 60% stock and 40% bond EF if I moved it into the market.  If we had any actually emergencies right now we would just pay it with our 15k limit credit card and then get the money transferred over to pay the balance off before its due.

milesdividendmd

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Re: Emergancy Fund
« Reply #13 on: June 14, 2014, 11:34:28 PM »
I have about 20-30K in our standard checking and savings accounts.

For kicks, I ran the numbers on my blog tonight about a creative method to completely eliminate the need for an emergency fund with the combination of a 0% balance transfer card or 2, some cashback cards, and an ISIS serve account.

I figured you could borrow 32K for 15 months interest free and actually make 4.2 % cash back to boot for your efforts.

It was a fun exercise, but my conclusion ended up being that such a levered approach was far too rich for my blood, and I would rather just keep my emergency fund in cash.

AZ

Thedudeabides

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Re: Emergancy Fund
« Reply #14 on: June 15, 2014, 12:26:05 AM »
I have about 20-30K in our standard checking and savings accounts.

For kicks, I ran the numbers on my blog tonight about a creative method to completely eliminate the need for an emergency fund with the combination of a 0% balance transfer card or 2, some cashback cards, and an ISIS serve account.

I figured you could borrow 32K for 15 months interest free and actually make 4.2 % cash back to boot for your efforts.

It was a fun exercise, but my conclusion ended up being that such a levered approach was far too rich for my blood, and I would rather just keep my emergency fund in cash.

AZ

Cool post Alexi. I'm very tempted to do this :D

milesdividendmd

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Re: Emergancy Fund
« Reply #15 on: June 15, 2014, 11:16:43 AM »
Thanks man. You're a braver man than me!



Gin1984

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Re: Emergancy Fund
« Reply #16 on: June 15, 2014, 12:14:47 PM »
I have about 20-30K in our standard checking and savings accounts.

For kicks, I ran the numbers on my blog tonight about a creative method to completely eliminate the need for an emergency fund with the combination of a 0% balance transfer card or 2, some cashback cards, and an ISIS serve account.

I figured you could borrow 32K for 15 months interest free and actually make 4.2 % cash back to boot for your efforts.

It was a fun exercise, but my conclusion ended up being that such a levered approach was far too rich for my blood, and I would rather just keep my emergency fund in cash.

AZ
But in a pinch this may be very useful.  Thanks!

Mr. FI

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Re: Emergancy Fund
« Reply #17 on: June 16, 2014, 10:26:06 AM »
Once upon a time, Capital One 360 customer service was able to temporarily give me a higher $25K limit on a cash advance on their debit card. I was able use the higher limit to get a cashier's check at my local credit union branch on short notice.

Yikes, but the interest rate on a cash advance is absurd. I wouldn't recommend this if you can help it.

Khan

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Re: Emergancy Fund
« Reply #18 on: June 16, 2014, 11:10:42 PM »
Having a large emergency fund in a savings bank account is for poor people. Mustachians who have built up a bit of a stache and are aiming towards ER don't need that. You get $30k or so in index funds in a regular brokerage account and you'll have more than enough to cover whatever emergency expenses you need in time. A credit card can cover anything in the 2-3 days it takes to sell and transfer that to a checking account.
Im starting to think I'm better off keeping about $30k in an index fund instead of $15k in a savings account to cover any emergency.  That way you can still cover an emergency after a big market drop, but with the odds that you don't need to tap it, you can have much better returns.

+1 to both of these. That's my approach, a taxable slush fund where all my excess money goes(oh, and it's margin approved). What emergency requires me to have actual cash, that can't go on a credit card? Someone putting a gun to my head? If they shoot and I'm not dead, I have pretty good health insurance so there's that. Replace a vehicle? Good credit standing, and a bicycle + motorcycle.

carrytrader

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Re: Emergancy Fund
« Reply #19 on: June 17, 2014, 05:36:33 AM »
Make sure the internet bank is FDIC insured. Then the risk is much lower and should not be a problem.

Mr. FI

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Re: Emergancy Fund
« Reply #20 on: June 17, 2014, 10:41:31 AM »
Make sure the internet bank is FDIC insured. Then the risk is much lower and should not be a problem.

I would hope all internet banks are member FDIC. I'm not sure if they could call themselves a bank otherwise.