What to Do With Your Emergency Fund

An emergency fund is a vital part of a healthy financial life. Your goal should be to have enough saved to cover at least six months of household expenses. How much you have saved is important, but so is where you keep those funds. Here is where you want to keep your emergency fund, and where you don’t.

The Best Places to Keep Your Emergency Savings

• Credit Union or Banks. Credit unions and banks feature some of the highest interest-rate savings accounts. While you might have to do some research to find a financial institution that works for you, it will be worth your time.
• Online Savings Account. An online-only savings account is a great place to keep your emergency fund. Many have high interest rates and you still get the FDIC coverage. 
• Money Market Account. Much like an online-only savings account, a money market account will offer you a higher interest rate than most traditional savings accounts. 
• Brokerage Account. Many online and brick-and-mortar brokers can be a good place to keep your funds. There are typically more savings and investment options to earn a return while still keeping your money liquid. Talk with a broker about what savings and investment vehicles may be best for your money. 

The Worst Places to Keep Your Emergency Fund

• Checking Accounts. Not only do checking accounts offer low interest rates, they are also easily accessible. You can tap into your emergency fund at any moment, and that’s a temptation you just don’t need.
• Illiquid Investments. When an emergency happens, you need to access your funds quickly, so you don’t want them sitting in an investment that you can’t get to when you need it. 
• Your Home. Keeping large amounts of cash at home may be dangerous for both burglary and the temptation to spend. Cash sitting in a safe or under your bed is not earning any interest either.

Do One Thing: Consider keeping your emergency fund in an account that has some growth potential and is accessible fairly quickly if you need it.