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Where to put your emergency fund

Six accounts to keep your emergency fund.

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Our pick for emergency savings: American Express® High Yield Savings

American Express® High Yield Savings logo

0.6%

APY

  • Monthly fees: $0
  • Interest compounded daily
  • Minimum deposit to open: $0
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Putting money aside for emergencies like car and home repairs or healthcare can help you stay out of debt and makes good financial sense. But where should you keep your emergency fund? There are many different options: high-yield savings accounts, money market accounts, CDs, IRAs and Treasury bills. Here’s how to decide which is best for you.

6 types of accounts to put your emergency fund

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:

High-yield savings accounts

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.

Pros

  • Strong APYs. Many banks — such as Synchrony High Yield Savings — offer savings accounts with rates above 1%. These guaranteed returns help you grow your money even faster.
  • Optional ATM cards. Some savings accounts come with an ATM card that lets you withdraw cash on the go. This could be useful for an emergency fund as long as you’re not tempted to spend the money on other things.
  • Minimal fees. Most high-yield savings accounts are offered by online-only banks with little-to-no fees, so you don’t have to worry about losing a chunk of your savings to miscellaneous charges each month.

Cons

  • Limited withdrawals. You typically can’t make more than six withdrawals from a savings account each month. But due to the coronavirus pandemic, many banks are waiving this requirement.
  • Could be inconvenient. If you open a high-yield savings account with an online-only bank, you may have to transfer money to an external account to withdraw funds if it doesn’t come with an ATM card.

Money market accounts

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.

Pros

  • Competitive APYs. Some money market accounts have higher APYs than high-yield savings accounts, although this isn’t always the case.
  • Easy access to your money. Unlike savings accounts, money markets come with a debit card and checkwriting privileges to help you cover unexpected expenses quickly.

Cons

  • Potential fees. Some money market accounts have high fees, so make sure you find one with a bank that won’t take a bite out of your savings each month.
  • High minimum balance requirements. Some banks require opening deposits of $2,500 or more for money market accounts, which could put them out of reach if your emergency fund isn’t big enough.
  • Limited withdrawals. As with savings accounts, you typically can’t make more than six withdrawals. However, your bank may be temporarily waiving this policy during the coronavirus pandemic.

Digital bank accounts

A digital bank account is similar to a high-yield savings account, but it typically comes with more tools and features to help you budget your money. Some popular options are Qapital and Digit.

Pros

  • Helpful tools. Digital banks have cutting edge mobile apps that help you set savings goals, track your spending and save automatically through round-ups and recurring transfers.
  • Few fees. Most digital banks have low overhead, which means they pass these savings onto you in the form of low fees.

Cons

  • No physical locations. Similar to high-yield savings accounts, most digital banks don’t have branch locations. Customer support is limited to live chat or phone.
  • May not earn interest. Some digital bank accounts have low interest rates or don’t earn interest at all. But you could end up saving just as much in the long run thanks to insights that help you spot extra cash in your budget.

CDs

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.

Pros

  • Highest APY of any bank product. If you want to keep your money at a federally-insured bank, a CD will offer you the highest interest rate on your money. To date, Marcus by Goldman Sachs and Pen Air offer some of the highest CD rates in the country.
  • APY doesn’t change. Savings account and money market rates are variable, meaning they could change at any time. But CD rates are locked in until maturity, so you don’t have to worry about your APY dropping.
  • CD ladders. If you want to invest in CDs but still maintain access to your money, open several CDs with staggered terms. With this strategy, each CD will mature on a rolling basis, so you maintain frequent access to your money.

Cons

  • Early withdrawal penalties. If you need to access your money before your CD matures, be prepared to pay a hefty penalty.
  • Restrictive. Because it’s impossible to know when you’ll need to use your emergency fund, you may not want to lock all your money away in a CD.
  • Higher minimum deposit requirements. Opening deposits could be as low as $0 or as high as $10,000 depending on which bank you go with.

Roth IRAs

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.

Pros

  • Higher potential rate of return. You invest your Roth IRA in the stock market, which means you could earn a higher return than you would with a savings account, money market or CD.
  • Can withdraw principal balance at any time. Unlike other retirement accounts, you can withdraw the money you put into your Roth IRA at any time without penalty.
  • Tax-free withdrawals. Qualified Roth IRA withdrawals are always tax-free, so you won’t have to worry about paying taxes on the money you take out.

Cons

  • Returns aren’t guaranteed. Unlike bank accounts that are federally-insured, you could lose some of your principal balance if you don’t invest your Roth IRA funds wisely.
  • Possible early withdrawal penalty. You could pay a 10% early withdrawal penalty if you withdraw interest for a nonqualifying expense before age 59 1/2.
  • Takes time to withdraw money. Accessing funds in a Roth IRA could take a couple of days if your custodian needs to sell off some of your investments and transfer the proceeds to your bank account first.

Treasury bills or bonds

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.

Pros

  • Tax-free interest. With a bank account, any interest you earn is considered taxable interest. But Treasury bill interest is typically tax-free, which means you’ll add even more cash to your emergency fund.
  • Low minimums. Usually, $100 is all you need to start investing in Treasury bills, making it a good option for those with a limited budget to start.
  • Multiple maturity lengths. T-bill maturity dates range from four weeks to one year, so you can choose a term that’s comfortable for you. You can also stagger terms to maintain access to your money during an emergency.

Cons

  • Not federally-insured. T-bills are backed by the US government, so they’re low-risk. But returns aren’t guaranteed.
  • Interest paid at maturity. You can sell Treasury bills before maturity if you’re in a pinch, but you won’t receive any interest.
  • Not easily accessible. If you need to access your money before your T-bill matures, it could take a couple of days to sell your investment, process the transaction and receive your funds.

Compare emergency fund account options

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
Easily accessible
Guaranteed returns
Low opening deposits
Minimal fees
Low-risk account

What other factors should I consider for my emergency fund?

Consider these factors when you’re comparing accounts for your emergency fund:

  • Access. Does the account offer online or mobile access to manage your money and view account activity?
  • Customer service. How can you reach customer service if you need help with your account?
  • Interest. Does the account pay a competitive interest rate?
  • Deposits and withdrawals. Can you easily make withdrawals through transfers or with an ATM card?
  • Fees. Does this financial institution charge monthly or service fees that could eat into your balance?
  • Requirements. Find out how much you’re required to deposit or maintain when you open the account.

Compare savings accounts for your emergency fund

Use this table to compare popular savings account options you can use for your emergency fund.

$
$
months
Name Product Interest rates (APY) Fee Minimum deposit to open Interest earned
American Express® High Yield Savings
0.60%
$0
$0
Enjoy no monthly fees and a competitive APY with this online-only savings account. Accounts offered by American Express National Bank, Member FDIC.
Axos Bank High Yield Savings
0.61%
$0
$250
No monthly maintenance fees. No minimum balance requirements. Interest compounded daily.
Aspiration Spend & Save Account

1.00% on $0 to $10,000 but you’ll need to be enrolled in Aspiration Plus and make at least $1,000 in debit card purchases a month
$0 per month or $7 per month for Aspiration Plus ($5.75 per month if you pay annually)
$10
Deposits are fossil fuel-free and insured by the FDIC. Enjoy a spend and save combo account with unlimited cash back rewards and a $100 bonus when you spend $1,000 in your first 60 days.
CIT Bank Money Market
0.50%
$0
$100
A savings account with a higher-than-average rate and minimal fees.
SoFi Money
0.25%
$0
$0
SoFi Money® is a cash management account that charges no account fees to save, spend, and earn cash back rewards when you spend on brands you love.
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Compare up to 4 providers

Should I keep my emergency fund at an online or traditional bank?

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.

How much should I have in emergency savings?

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.

How do I build an emergency fund?

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.

Alternatives for my emergency savings

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:

man holding his daughter

Cash-value life insurance

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.

a woman opening a money market account

Money saving apps

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.

Bottom line

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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