Having an emergency savings account is a must for everyone; regardless of living situation or income. Putting some money aside for emergencies can offer peace of mind in times of financial crisis, and help cover things when regular income is sparse. As to where to put your emergency fund, that’s up to you, but there are better options than just stuffing it under your mattress.
An emergency fund is there to help cover unexpected events that would majorly disrupt your finances. Having an emergency fund can help you avoid having to borrow money in times of financial struggles and keep your living expenses covered until you’re back on your feet financially.
Things that you can use your emergency fund for include job loss, unexpected medical bills, home repairs that can’t wait or even urgent pet care.
Emergency funds are different from sinking funds in that a sinking fund is money you put away for expected upcoming expenses like vacations or Christmas gifts.
It’s recommended to have at least three to six months of monthly expenses saved for an emergency fund.
Since everyone’s expenses are different, your ideal emergency fund size will be unique. Factor in your housing, utilities, loans, groceries, transportation and other essentials you pay every month. The average emergency fund is $17,544, according to Finder’s Consumer Confidence Index.
If you don’t have an emergency fund — and 55% of Americans say they don’t — then start small. Aim to tuck away at least $1,000 somewhere safe and keep it growing from there. While $1,000 may not cover three months of living expenses for most people, it could help with a rent or mortgage payment, car troubles or a week of temporarily reduced income.
We won’t tell you to remove your hidden cash from the rafters, but we will say that one of the better places to keep your emergency fund is in an insured deposit account, such as a high-yield savings account. We asked over 8,000 Americans where they put their emergency fund, and 56% reported a savings account, and 20% said it’s in cash.
Unlike a piggy bank, keeping your emergency fund in an interest-bearing deposit account puts your money to work thanks to compound interest and high-yield rates. It also gives you more access to your money when you’re not home, grows your balance over time, and cash in deposit accounts are protected under FDIC insurance.
Some great places to put your emergency fund include:
Consider stashing away emergency funds in a high-yield savings or money market account like these to maximize your savings.
SoFi Checking and Savings
Wealthfront Cash Account
Public High-Yield Cash Account
"While more restrictive accounts, like CDs and Roth IRAs, may offer higher interest rates to grow your money, they charge a penalty if you need to access your money in an emergency. Weigh the pros and cons before locking your money away. Choosing a more accessible account like a high-yield savings account or money market savings account gives you faster access to your money during an emergency — especially if it comes with a debit or ATM card."
Growing a full emergency fund will take time; don’t expect it to meet your ultimate goal fast.
Consider these five factors when comparing accounts:
An emergency fund helps you prepare for the unexpected and tackle surprise expenses head-on without jeopardizing your financial health. There are many different accounts to choose from, and whether you choose to keep your money in one or spread across multiple accounts is completely up to you.
The key is to keep your emergency savings someplace secure and accessible, and ideally, a savings account that can keep your funds growing.
Pibank offers one of the highest-yield savings account rates. Plus, there are zero monthly fees or minimum balance requirements.
A savings account’s minimum balance can depend on the account type and the bank’s individual requirements.
It’s tempting to spend your emergency fund, but think really hard before you splurge that safety net.
Wealthfront, SoFi, Ally and Capital One are among the best banks that let you name your savings goals and split them into buckets.
Earn up to 8% with BCU Powerplus Checking and close to 7% with other accounts from Greenlight, Netspend, Varo, Uphold and more.
A money market account offers check writing abilities and a higher interest rate, while a savings account has lower deposit requirements.
A free savings account with an industry-leading APY — but only one way to grab your money.
Raisin is a marketplace that offers exclusive savings offers from hundreds of trusted banks and credit union. But how are the rates?
Earn up to 6% with Greenlight, 5% with Varo and just under 5% with Barclays, Western Alliance, Uphold, Wealthfront and more.
Interest rates on savings accounts fluctuate over time. See the national average rate since 2010 to gauge how your financial institution compares.