Where is the best place to keep an emergency fund?

[questions]

I finally saved up enough money that I have an emergency fund. Currently it's sitting in my savings account at my local credit union. Is this the best place for me to keep my emergency fund, or is there a better place? Should I have all the emergency fund in the credit union, or should I have some of it in cash at my house? This is all very new to me because I've never had an emergency fund before, so I'm not exactly sure where I should keep the money so that it's available if something does happen when I need to use it. I guess I'm asking where is the best place to keep an emergency fund, and where do most people keep their emergency fund?

[bjl584]

Someplace safe and accessible. It's probably a good idea to keep at least some cash in the house. Either in a safe or in a hidden place. The rest should be at your local bank, credit union, or online savings account. Your EF shouldn't be viewed as an investment. It's peace of mind and security should you have an emergency and need cash in a short amount of time. Don't invest it into anything that could lose principal value like stocks or mutual funds. Stay conservative with it.

[lorraineb]

How much exactly do you have in your emergency fund? Have you just saved your first $1000, are we talking an emergency fund of six months worth of expenses? Depending on how big the emergency fund is, don't make a big difference on where you would want to keep it. If it is a small number, I would keep it in your local credit union so do you have easy access to it should something happen. I'm assuming that that is probably where you're at right now since you indicated that you have just managed to save up an emergency fund.

[dczech09]

Your emergency fund should be kept somewhere safe and accessible. You are not concerned about making any return on investment here; you are simply looking for liquidity in case you need it.

I personally have a $100 bill tucked in my wallet (commonly referred to as a red-neck emergency fund). The rest of my emergency fund money is currently in a bank savings account.

Do not put the money in stocks, bonds, or C.D.'s. Your options are bank savings, credit union savings, or a money market mutual fund with check writing available. Stocks and bonds are too risky for short-term money and C.D.'s have penalties.

Again, you should not be concerned about making money with your emergency fund. You just want it to be accessible if and when you need it.

[janecropper]

My advice is probably contrary to what many would recommend. I keep my emergency funds in intermediate munis and short term corporate bonds. It is true there is risk of loss of some principal when interest rates go up but that loss of principal would be far less than equities and you will realize a much better interest rate. You would need to determine whether munis make sense based upon your tax bracket. IMO, short term investment grade corporates are much better than MM or savings account.

[dczech09]

It is true there is risk of loss of some principal when interest rates go up but that loss of principal would be far less than equities and you will realize a much better interest rate.

The purpose of an emergency fund is simply liquidity. Bonds or stocks are not the most liquid.

I am not sure why you would say that the loss of principal would be far less than equities? First of all, it is not recommended that you put emergency fund money into equities (stocks). Second of all, the stock and bond markets do not necessarily move in the same direction.

They have a positive correlation, put there are instances where a difference in direction can occur. Also, there is such thing as low-risk stocks. So making this determination without defining the parameters may be wildly inaccurate.

In some cases, bonds in general can carry a higher standard deviation (risk) than stocks. In the interest rate environment that we are currently in, that is a future possibility.

[JoeP]

Savings account. If emergency strikes, I can execute an electronic transfer to checking and then run the expense on debit. If it is a cash-only emergency, then the credit union is about 5 minutes up the road.

[kork13]

I prefer a 3-tiered emergency fund.
1) I keep a $1k buffer in my checking account, plus $500 in my savings account with free overdraft protection.
2) 1 month's expenses in a separate online savings account
3) 5 months' expenses in federal I-Bonds, which gives me a better interest rate, still guaranteed safety, and after the first year, they can be withdrawn with a minimal penalty (3 months' interest), and after 5 years, there's no penalty at all.

[herdjohnson]

I keep it in savings at my credit union. 3% interest on the first 15k. Perfect for an emergency fund.

[carmela1]

I just put my EF on another bank savings account and I don't bring the ATM card.

[Permanent Temp]

Mine is in an online bank because its liquid and has a decent interest rate.

[jamiesmoneyadvice]

Safe Banks

Credit unions are pretty safe places for your money.

[jasonandrick]

Everyone needs to have an emergency fund for those unexpected moments to avoid credit dues. I think having it in your savings account is the best way because it’s available in the events of a personal disaster and yet it can be insured as well even there is a bank failure

[jackmiller]

In the bank an din an account that you cannot touch.spend easily. It is an insurance policy not anything else.

[maat55]

It might depend on how disciplined you are with your money. I keep money in accounts and at home. If I were not disciplined I might keep it in a money market fund with an online mutual fund provider.