Our pick for emergency savings: American Express® High Yield Savings
- Monthly fees: $0
- Interest compounded daily
- Minimum deposit to open: $0
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There is no right type of account to keep your emergency fund. But you’ll want to choose one that earns you interest and helps you reach your savings goals. Here are six accounts to consider:
A savings account is the most common account used for emergency funds. If you’re going to take this route, look for a high-yield savings account with minimal fees. Some popular options are Discover Online Savings and American Express® High Yield Savings.
Money market accounts work just like savings accounts but with the added flexibility of checking accounts. For example, BankPurely Money Market and Sallie Mae Money Market both come with debit cards and checkwriting privileges, and they earn competitive APYs.
When you store your money in a certificate of deposit (CD), you agree to lock your money away for anywhere from three months to 10 or more years. You get a high, guaranteed APY, but you’ll pay a penalty if you need your money before it’s time.
A Roth IRA is a retirement vehicle that’s funded with after-tax dollars. But they’re also a great place to store your emergency fund.
Treasury bills or T-bills are short-term bonds backed by the US government. You typically buy them at a discount and sell them for profit at maturity.
Use this table to compare these six popular accounts to keep your emergency fund in:
|Savings accounts||Money market||Digital bank accounts||CD||Roth IRA||Treasury bills|
|Low opening deposits|
Consider these factors when you’re comparing accounts for your emergency fund:
Use this table to compare popular savings account options you can use for your emergency fund.
It depends on your personal needs. Online banks typically have lower fees and higher interest rates than traditional banks and credit unions, which means your emergency fund can build up more quickly. But it may be harder to access your money during an emergency if your online account doesn’t come with an ATM card or branch access.
If you’re the type of person who wants to be able to visit a branch and get one-on-one assistance at any time, a credit union or traditional bank may be a better fit — even if you earn a lower interest rate.
A general rule of thumb is to save between three to six month’s worth of expenses, while some experts suggest saving for up to one year. However, how much you can contribute depends on your income, expenses and financial goals among other factors.
You can start a small emergency fund with as little a few hundred dollars, which may come in handy for things like unexpected car repairs, pet emergencies or other essentials.
You can build an emergency fund just like you’d save for any other financial goal. First, determine how much you want to save, then make an initial deposit or recurring contributions into the account until you reach your goal. Here are five tips on how to start an emergency fund that weathers any financial storms.
Savings accounts are the most commonplace to park an emergency fund, but there are alternatives. If you’re looking for a nontraditional place to store your money or want to build an additional reserve beyond a standard emergency fund, consider these other options:
Life insurance is a financial product that’s good to have, but never fun to think about. A cash value policy can protect your family if you die, but you can borrow from the policy if you need access to cash. You’re not required to pay back these loans, but they affect the balance your beneficiaries receive when you die.
Money savings apps help you accomplish a whole slew of financial goals—cutting down on unexpected costs, learning to invest wisely and saving your spare change. We’ve rounded up a list of the top nine money saving apps that could help you boost your emergency fund and tackle your financial goals.
An emergency fund helps you prepare for the unexpected, so you can tackle surprise expenses head-on without jeopardizing your financial health. There are many different accounts you could use to store your emergency fund, including savings accounts, Money market accounts, CDs, Roth IRAs and Treasury bills. Whether you choose to keep your money in one of these accounts or spread across multiple accounts is completely up to you. The key is to keep it someplace safe, secure and accessible, so you always have money on-hand when an unexpected emergency pops up.
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