Where Should You Keep Your Emergency Fund?

Where Should You Keep Your Emergency Fund?

By AJ Smith

We have all heard and (hopefully) heeded the advice to keep between three and six months' worth of expenses aside as an emergency fund. Even if you feel like you have a handle on budgeting for your day-to-day expenses, what happens when the unpredictable hits with the potential to set your finances back?

This stash is not meant for buying a home or going on a trip, it is for real emergencies. It's a good idea to make growing an emergency fund a priority and where we keep this money can make a big difference.

It's important for the money to be accessible, but it can also be earning interest while waiting to be tapped. If you are building up your emergency fund and looking for a better place to keep it than under the mattress, check out these options of places to park your emergency fund.

Online Savings Account

Traditional savings accounts can be great for those of us who like to play it safe, but interest rates will not do much for you. Online banks do tend to offer slightly higher rates and lower fees so you could see a little more growth.

Furthermore, it's important to keep your emergency savings fund away from your normal checking account so you have some separation between your spending cash, cash for other savings goals and your emergency cash.

Money Market Account

This is a common place for emergency funds for those looking to get better interest rates. They are similar to regular savings accounts in terms of FDIC insurance and limits on the number of withdrawals you can make each month, but typically require a higher minimum deposit and they sometimes carry higher fees. It's a good idea to read the fine print before choosing which account to keep your emergency fund in.

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