Where to Put Emergency Fund

[mrsrudyjax]

OK - so we have a good size emergency fund. I have it sitting in a savings account earning 4.75% interest. Should I leave it in savings, or would there be a better place to keep it?

[MrsPinecone]

I have ours in an Emigrant online savings account at 5.25% (or something like that).

[lisa89]

We just opened an account at Capital One with our Emergency Savings. I think it's close to 5.00, maybe 4 something, not 100% sure right now!

I would say you are fine with what you are getting.

Lisa

[BzyBee]

That really isn't too bad considering it is money you may need to get to in a hurry. I think ours is earning about that right now...next month DH is moving it to a different sort of account and we will be getting over 5%...sorry, I don't know all the number exactly right off...

Someone recommended to us to get a series of CD's at regular intervals and keep them rolling. I don't remember why we didn't do that...maybe the rates were not good enough...

LOL...sorry, I did mean to help and now I don't seem to remember any of the relevant #'s. Perhaps DH will log on later and clarify what I explained very poorly.

[berlinsmommy]

Depending on what you mean by sizable, you may want to chase down a few CDs/savings/MM that are higher rates or even promo rates. Doesn't HSBC have a "new money" promo going right now that you can get 6%? If the highest return is CDs and this is your emergency money, just calculate how much you can tie up. For example, if you have 12 months of income in savings and find a stellar rate on a 6 month CD, you could feasably tie up half of your savings. Does that make sense???

[niftyneon99]

we have ours in Emigrant Direct too earning the 5. some odd percent interest.

I would look into cd's too if you have a sizeable amount. Even if you only put half into cd's and leave the other half liquid in ED or ING.

[computerguy923]

Probably a money market is the best option. CDs are good too, but if you have to pull them out you are going to lose a little interest as penalty. Depending on how much better though the amount might be worth the penalty. Also remember that might can take avantage of offers out there too. For example, Suntrust will give you a free plane ticket if you put $10,000 in the bank. So look for deals like that. Move it around from time to time and take avantage of those promo offers to get the best deals.

[mrsrudyjax]

Thanks for all the info. I guess I just have to decide if I'm in the mood to chase rates. That Suntrust deal sounds pretty good, too bad I'm not in a state they are offering the promotion in.

[BzyBee DH]

For us, we wanted the convenience factor of a local bank for all of our needs. We compared banks and BB&T had the best rates with a treasury Account. (around 4.5% right now).

We like the convenience of the local bank for the multiple checks that I get from business expenses (and the rebate checks that BzyBee earns), and for the kids to go in and deposit their savings weekly, etc. It is clearly important to our kids that they "feel" the savings as they weekly deposit their earned money into the bank. (DD started at 8 yrs old, I think)

There are better methods to get another 1% or so.

However, in the greater scheme of savings, the emergency fund is a very small (or at one point will be!) of the overall savings/retirement plan. We have chosen convenience over earning power.

Now for the actual retirement/savings accounts - that is an entirely different story. That is where the effort is to maxmize long term earnings!

The great news is that you have one now. Put it somewhere FDIC insured, and then go to the next step in the process!

[berlinsmommy]

For us, we wanted the convenience factor of a local bank for all of our needs.

To an extent I'm with you on that one. Another factor to consider when using a local bank is the days of interest you would lose otherwise. For example, if you deposit $1,000 in your savings at the local bank or by transferring it from checking within the same bank, the transfer is instant and starts earning interest that day. If you transfer money to an outside bank, it can take as much as 3-5 days to post. That's 3-5 days of lost interest.

That (and a higher interest rate) was why I chose a money market at our local bank, the same bank we have our checking and direct deposit at. Both DH and I get paid on Fridays (opposite Fridays, so every Friday is payday for someone). So every Friday I set down in front of the computer, pay all bills due that week, and transfer what is left into our money market account. It starts earning interest that day. When I was transferring it to ING, it was taking until Wed or Thur of the following week to post. Over time that adds up to a lot of lost interest. Then when I needed the money out for something, I had to plan to transfer it out 3-5 days in advance and lost interest that way. It doesn't seem like much, but if you consider (for simple math) that at 5%, $1,000 gains 13.7c per day, over a year of transferring money in and out 4-6 times a month, a 3-5 day delay in interest can start to add up.