where to put emergency fund

[terces]

I was thinking of keeping a separate account for our emergency fund while we continually work on building additional savings. What type of account is best? Just a regular savings account? Would be nice to get some interest without locking it up or anything.

[ActYourWage]

Check with a LOCAL credit union/bank, they sometimes offer the best rates. My local bank offers a 3.51 rate on balances $25k and under provided you meet certain criterias.

An emergency fund is not meant to draw a great amount of interest. You can think about that after you have established an EF. The key is to focus on building one up first.

[jIM_Ohio]

check for the following

credit unions
money market accounts at brokerages
savings accounts
short term CDs

[HistoryChick]

2nd local credit unions and banks (I read last night of a small bank in Texas offering 4.x%!!)

Also check bankrate.com to for online bank rates and the sticky maintained by poundwise in the Investing forum

[swanson719]

We use a money market mutual fund through our broker. The biggest thing for us is we are both what Dave Ramsey calls "Spenders". So we put it where we can't get at it in a spur of the moment purchase. Ours is set up as an ACH payment out of my paycheck every two weeks straight to the brokerage with our Roth payments, then they separate it as we designate. We can access the money market after going down to see our account manager, signing some paperwork, and then they mail us the check in the amount we need, and it gets to us about 3 days later. That might not be ideal for a legitimate "emergency", but to us, the $1,000 we keep in personal savings should cover the difference between something catastrophic happening that we need to get into out EF and the money actually arriving in the mail.

[snafu]

Base your access to Emergency funds on past experience considering bank account fees. For example, if you get free banking services by keeping a minimum $1,000. balance use that sum with double purpose.

Most brokerages give access to Money Mkt electronically; in 3 business days it transfers for use in your linked chequing account. Stash other monies in laddered CDs 30 days, 60 days, 90 days in $ 1,000. increments or best rate Savings as noted in this forum.

[TheMoneyMan-Leo]

I would just like to second the idea of putting it in a place where it might take 2-3 days to get at.

I have an account at ING and many a time an urge to spend, "emergency" or not has passed by the time the money would arrive.

I prefer to call them "opportunity funds"....that's just me.

[glock35ipsc]

We keep ours in an interest-bearing checking account at a bank other than our regular bank. That way we can't transfer it to out personal checking account.

[frugalnoggin]

You'll have to do some research because the banks available to you vary by state, but here's an option. Look for a bank that offers a high yield checking account (do a little google searching for a web site that offers high yield checking comparisons). You should be able to get an online, high yield account close to 5%. How much you can keep in this account will vary. You will have to make at least one electronic deposit each month, usually 10 debit card transactions, and receive your statement electronically to earn that rate.

Use this account to build up your EF each month - setup automatic payments from your paycheck, and make sure you make your 10 debit card transactions, but buy little things like a cup of coffee (have a budget!). This will allow you to earn a good rate on a very safe investment - and the funds are always available.

When you reach the max on this account, look for online savings accounts with high yields. Transfer money from this account to your new high yield savings account in modest sized amounts until you have a nice amount built up in your online savings account.

Now look for CDs that have better yields than your online savings account and build a "ladder" of staggering terms so that your cds don't all expire at the same time. Buy CDs with funds from your online savings account, then rebuild your savings over time from your checking account, which is being funded each pay period.

When you've built up an appropriate sized EF in checking, savings and CDs, which are all pretty safe and easily accessible, then you can go look for more exotic investment vehicles that might produce higher returns. These vehicles are safe, but not exciting and you know you can have access to the funds with (almost) zero chance of capital risk within prescribed time limits (immediate with your debit card and 3 days with ETF).

If you set this up right, it should mostly be on auto-pilot. Each pay period payments are automatically deducted from your paycheck and are deposited in your high-yield checking account. At some point in time, you will reach a point where you need to transfer money out of that account because you reached the max - now you will create a new high yield savings account. Now you do nothing again until the checking account again reaches its max, when you again transfer a similar amount of money into your savings account. When your savings account is suitably funded, you look for a nice yielding CD and buy it from your savings account. When your savings account gets to the same point again, find another CD, say 6 months or 12 months after the first one, and buy that. Just keep up the cycle until you reach your EF goal. The major trick is to be absolutely steadfast in not spending anything except the budgeted 10 transactions from your high yield checking account - this is NOT a general purpose checking account, and those 10 transactions are merely for the purpose of qualifying for the high interest. If you can't discipline yourself to buy 10 cups of coffee per month (or whatever your budgeted items are) then maybe this isn't the right account for you, find an account with lower interest and fewer restrictions.