Tips on Where to Keep Your Emergency Savings

Last week life threw me one of those proverbial curveballs that always seem to happen at the absolute worst time: my beloved corgi puppy was diagnosed with a congenital liver defect that required immediate surgery on both her liver and bladder. She’s like a child to me - how could I possibly say no? Although we do have pet insurance, it only pays for a portion of the procedure, and I had to pay a percentage up front. Fortunately, we have an emergency fund for contingencies like this. And thankfully we kept the fund in the right place.

In my role as a financial counselor, I have had a service member tell me that her late-model luxury car was her emergency fund. I’ve also had clients tell me that valuables like jewelry and china are their back up plan. And then I have folks who say that part of their checking fund is their rainy-day fund, too. Unfortunately, these are not good choices!

Where Should You Keep Your Emergency Fund?

  1. In an account that is liquid.

In the banking world, liquid means easily convertible to cash. When an emergency hits, you want to be able to get at your money quickly. That’s why a car, or jewelry, or grandma’s gold earrings do not make for a good emergency fund. Even some types of banking vehicles, such as Certificates of Deposit (CDs) aren’t good emergency funds because they may charge a penalty for early withdrawals. 

  1. In an account that is separate from your other checking and savings accounts.

If you have a merged checking and emergency savings account, then it can be *really* tempting to dip into whatever portion of it you have mentally designated for emergencies. We actually keep our emergency fund at a bank that is completely separate from the bank where we have our pay deposited and do our day-to-day banking and bill paying. 

  1. In a no-fee, FDIC insured account that bears interest.

Interest rates are up, which is good for savers! These days there are so many reputable online banks offering great interest rates that there’s no reason to keep funds in an account that is earning little to no interest. You can search on sites such as Bankrate to find institutions that currently offer competitive rates. Then make sure that the account is insured by the Federal Deposit Insurance Corporation, which insures deposits up to $250,000.

Thankfully, although she hates her “cone of shame,” my dog is well on the way to making a full recovery. And our bank account will be making a recovery, too. Now that we’ve depleted it, we need to make refilling our emergency fund a priority. We’re moving this summer, and Murphy’s law means that disaster has a crazy way of striking again.

Want help starting an emergency fund or saving for a purchase? Want to build wealth, not debt? Take the Pledge today and then visit Militarysaves.org for valuable resources that can help you achieve financial success.

Tip of the Day

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