best place for Emergency Fund

[shibabigk]

We have a -currently very small- EF, which will hit $2000 in December. I am trying to figure out in what type of account and where I should put it. It is currently in a savings account with close to nothing in intrest.
Now, obviously I need to be able to withdraw it quickly if I have to, which I currently can, but I could keep part of it super liquid and part of it in an account were it might take a few days to get it out to benefit from intrest.
What do you guys think?
Thanks!

[bjl584]

A high interest online savings account may be your best option. There is a tread on the forums that you can go to to compare current rates. If you are uneasy about putting your money into an online institution, then you should consider opening an account with a local credit union. They often will offer better rates than a bank.

[atomicrc11]

Also check your bank or credit union. Some banks from local ones to big ones like Citi have higher yielding accounts.

[Alex_Adviser]

Originally Posted by shibabigk

We have a -currently very small- EF, which will hit $2000 in December. I am trying to figure out in what type of account and where I should put it. It is currently in a savings account with close to nothing in intrest.
Now, obviously I need to be able to withdraw it quickly if I have to, which I currently can, but I could keep part of it super liquid and part of it in an account were it might take a few days to get it out to benefit from intrest.
What do you guys think?
Thanks!

Hi,
There are lots of bank provides the facility of fixed deposit, and they provide very good interest. Previously there was the problem with fixed deposit that they take a long time to cash the amount but now money can cash within 24 hours. So i suggest you to keep your money in fixed deposit.

[shultice24]

I would agree with the previous posters that a high-yield savings is definitely the best way to balance return and all-important liquidity. You'd just have to invest a little time in rate-comparison.

I'm sure I'm not the only one who has seen the ads recently for Ally Bank's 'No penalty' CD. Don't know much about it, but it might be a worth looking into.

[LuxLiving]

We keep ours in a MM locally that is linked to our online savings. Anything over a set dollar figure gets moved online where it earns better interest and is available w/i 2-3 days. The MM is also linked to our regular checking AND can have checks written on the MM account as well. Having them all linked makes transferring money around easy.

Having cash to pay the bill is great, but not always necessary. Many times when tapping the E-fund we just go ahead and use the CC and then move the money in from the E-fund later to payoff before any interest accrues.

Just recently when paying the tree-removal guy he didn't take CCs, so we wrote him a check. Now, the ongoing house-budget spending plan is rebuilding the e-fund the amount dispersed.

[mommyof4]

I'm going to go against the grain, here, and tell you to keep your money easily accessable, even if it is in a local bank. The purpose of an emergency is not to build a lot of wealth with it, but to have it easily accessible in case of an emergency. I personally keep my small emergency savings in a local bank, earning a whopping 1% interest, but it is immediatly accessible in case I would need it. The problem with my EF when it was at Cap One was that there was a 3-4 day transfer time between my local bank and Cap One.

[ceejay74]

I too currently favor the instant access of having savings accounts linked to my checking accounts, though the interest rates are pathetic (less than 1%). I can transfer money into either of my checking accounts from either of my savings accounts and it will happen instananeously. (I also have overdraft protection, but in my U.S. account they've implemented a $2 fee per transaction for using it, and the 25% interest starts accruing instantly on what I've drawn from the line of credit, so I'd hate to have that be my instant-emergency option.)

[JustDave]

I'm a fan of keeping some instantly liquid (you never know when you'll need cash), but I keep the most in a higher-yielding account online.

It takes 2 days for the money to transfer back to my checking account, but I don't anticipate a scenario where a credit card wouldn't be accepted as a payment method while I'm waiting for the funds to transfer. And I'd probably pay for a large purchase on a credit card, anyway.

[shultice24]

Originally Posted by mommyof4

I'm going to go against the grain, here, and tell you to keep your money easily accessable, even if it is in a local bank.

That is a valid concern for sure, though with some banks (ING for sure, as I use them) you can still have a higher-yielding savings and a checking account (Orange checking w/ debit card for ING customers) that allows you to successfully have liquidity and better rates. Internal transfers from an Orange savings to Orange checking happen instantly.

[LuxLiving]

Most emergencies aren't emergencies per se. They are of the unexpected or inconvenient type.

Such as water pipes burst and must call out plumber but a hefty plumbing fee is not in THIS month's budget.

Or the transmission goes out on the car.

The MM feature at my bank is instant. It has check writing available. I just write the plumber a MM check. I pay the transmission guy w/my CC and then move the online money back local then payoff CC. Simple. In my mind there is not a need to have a large amount of money sitting idle. We decided on keeping a little over $2500 (lower-limit w/o fees) in the MM and moving the rest on out to being liquid, but yet earning some better interest. The need for much more than that in an emergency situation seems improbable to me.

Various families and scenarios could conceivably call for keeping more $s liquid - I'd like to hear about those situations. Anybody got some special situations I haven't thought of?

[disneysteve]

LuxLiving, I agree with you. There are folks, though, who don't have credit cards. In that case, I think a larger cash reserve is much more important. If my car breaks, I can get it fixed and charge the repair and I've got time to get the money into my checking account to pay the CC bill. If I had no CC, though, I'd need that money readily available. Or Saturday night when our sewer drain clogged and the plumber came out, I charged the $300 bill. If not for the CC, I would have needed to be able to write a check or pay cash for the service call.

[MonkeyMama]

I keep $1k liquid cash for an instant emergency (earning just about no interest in my bank). Honestly, never needed it and can't forsee why I would. Even if you wrote a check, would anyone blink if you said, "can you cash that in 2 days while I do a transfer?" I keep this in the bank 1000% just in case I screw up my math and overdraft my checking. Also, means I don't have to run to the bank on payday.

Regardless, my high yield savings account only takes one day to transfer, and my other high yield money market account has checks tied to it. Both of those are about as liquid as it gets. You don't have to give up liquidity for higher interest rates.

[disneysteve]

Originally Posted by MonkeyMama

Even if you wrote a check, would anyone blink if you said, "can you cash that in 2 days while I do a transfer?"

Maybe a friend would let you slide, but you certainly can't be doing that with any business. When you hand someone a check, it is your responsibility to make sure that check is good right then and there, not 2 days later. More and more merchants have that electronic system to verify checks on the spot. If they run the check through and it gets denied, you're out of luck.

[wincrasher]

I actually keep real cash in the house for emergencies.

I'm surprised to read that a plumber, or a locksmith or a handyman would actually take a check or a credit card.

So I keep anywhere from $5k to 15k in my safe to deal with "emergencies" and to take advantage of any opportunities that may arise.

My EF is currently earning 0 in my checking account. Sigh.

I really need to buy some CDs or something. I just get uncomfortable locking EF money in anything.

[LuxLiving]

Our plumber is our friend, so yes, he takes our check. Ahh, the joys of being blue collar and having blue collar friends.

But, even if he wasn't a friend - worst comes to worst, our bank is about 5 minutes away, I jump in the car and he follows me to the bank or an ATM to get him some cash.

[gertymac]

We keep our EF in a money market account earning 2% interest. We can access it from the ATM, which is less than a 5 min walk away. We very rarely carry or keep any cash on us.

[shibabigk]

Great input.
I think I agree that the money does not need to be available immedeatly. We do have credit cards to use for something that we must pay for right at this moment and the landlord takes care of the plumber. I'll probably keep the $2000 in the savings account that they are in sine I can get it out in an instant just in case, and find a better intrest rate for the future contributions.

[disneysteve]

Originally Posted by wincrasher

I'm surprised to read that a plumber, or a locksmith or a handyman would actually take a check or a credit card.

I think it is rare to find anyone who doesn't take credit cards today. Our lawn guy doesn't. I have to send him a check. Other than that, I can't think of any service guy who doesn't take credit cards.

[MonkeyMama]

Originally Posted by disneysteve

Maybe a friend would let you slide, but you certainly can't be doing that with any business. When you hand someone a check, it is your responsibility to make sure that check is good right then and there, not 2 days later. More and more merchants have that electronic system to verify checks on the spot. If they run the check through and it gets denied, you're out of luck.

I don't agree - businesses are usually pretty lenient. Depends what business we are speaking of, perhaps. I mean I agree it's your responsibility to have a good check, but come one, how many people do? Businesses deal with the masses, who aren't terribly responsible with money.