The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Izybat on May 03, 2017, 06:42:58 PM
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I've been in 'get out of debt' mode for a long time, but thankfully, that's starting to wrap up. I'm very close to wanting to split some of my extra funds into building up my emergency fund/FU fund money, and want to know the best vehicle for this money.
For years, we've had the mini emergency fund of $1,000 (give or take) as recommended by Ramsey. However, I really need to start bumping that up for both my sanity and that of dear husband. (He could really use some FU money to quit his job, but we just don't have it at the moment.) Right now, that mini emergency fund is just in a standard savings account. Should I continue with that? Try to move to a money market account? Should I try to start investing it in Vanguard mutual funds? What threshold to people use for each option?
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If I might need to spend the money in the next 6 months, I keep it in a savings account. I say keep it simple. No need to overthink this...
Congrats on almost being out of debt!
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Investing is a good idea eventually, but you don't use money you may need quickly because while the market does in the long term always trend upwards, it might be down right when you have a car accident or someone loses their job and you need every penny right then. That's why it's never recommended to invest true emergency funds - safe and boring savings accounts are the answer.
You should never take risks with emergency funds unless you have other means of paying for actual emergencies, but then it wouldn't necessarily be considered "emergency fund" money at that point. ;)
Find a high rate savings account (I use Ally at 1% interest) and try to add to it so it covers a minimum of 3-6 months worth of expenses. Then leave it alone and start looking at investing with any additional funds at that point, assuming you've also paid down any high % debts.
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Online banks: Ally, CIT, or Synchrony. We use all 3.
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That's all good to hear actually. Putting it in a savings account was what I originally had in mind. I use CapitalOne360 right now, and love it. I just looked into their money market account, and they pay 1% if you have $10,000 in the account, and .6% if you have less... Which is odd, because my regular old savings account in the same bank pays like .75%. Since I'd start out with less than 10k, I might just stick with the account I have for now, and possibly change in the future as the balance goes up.
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if under $10K is your total savings, it belongs in a cash savings account.
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Another plug for Lake Michigan Credit Union.
3% on up to $15k.
Just have to make 10 debit transactions / month (I buy ten $1 Amazon egift cards)
And 1 direct deposit (I auto-transfer $250 from my USAA account into and out of LMCU).