April 20, 2021

Where to Keep Emergency Fund

Where should an emergency fund be kept for quick, easy access? Explore your options to find out where your money is safest and which accounts to avoid.

Ideally, your emergency fund should be kept in an account that is:

  1. Quick and easy to access (not too easy like a checking account)
  2. Safe and free (or nearly free) from risk
  3. Accruing some interest

High-yield savings and money market accounts are good options because they check those boxes.

But there are alternatives to consider if you're working with a windfall or want to "lock away" your money. Find out where to stash your emergency fund, how much to save up, and more.

Where Should I Keep My Emergency Fund?

Accessibility and safety are ideal conditions for your emergency fund spot. Below, review the pros and cons of popular emergency fund locations to decide which is best for you.

Best: High-Yield Savings Account

If you prefer a savings account, high-yield savings is the way to go. These accounts are usually offered by online banks that save money by not having to run brick-and-mortar locations. They pass those savings on to you in the form of higher APYs.

Why it works:

  • Easily accessible: Can be transferred to your main checking account in 1-2 days; a few banks may offer an ATM card
  • Safe/low-risk: FDIC- or NCUA-insured; none of the risk of an investment
  • Reliable interest returns: APY usually ranges from 0.1% to 0.6%
  • Minimal fees: Most monthly service fees can be avoided by maintaining a minimum balance

What savings account should I put my emergency fund in?

CIT Bank
Member FDIC

CIT Bank Savings Connect - 0.50% APY

  • Earn a competitive high yield savings rate with access and convenience features of an eChecking account.
  • Earn up to 0.50% APY on Savings Connect and 0.25% APY on eChecking.
  • Savings Connect is a tiered interest rate account dependent on the account holder opening a linked qualifying eChecking concurrently and makes periodic qualifying deposits.
    • Base Tier: (0.42% APY, 0.399% Interest Rate) A minimum qualifying deposit of $200 is not deposited each month into the linked eChecking or the eChecking account is closed.
    • Upper Tier: (0.50% APY, 0.499% Interest Rate) A qualifying deposit of $200 or more is deposited into the linked eChecking account each month.
    • APY assumes a qualifying deposit of $200 or more is made to the linked eChecking account each month.
  • Minimum of $100 for both the Savings Connect and eChecking to open ($200 total).
CIT Bank
Member FDIC

CIT Savings Builder - Earn 0.40% APY

Earn up to 0.40% APY. Here's how it works: Maintain a minimum balance of $25k OR make at least a $100 minimum deposit every month. Member FDIC

Discover Bank
Member FDIC

Online Savings Account - Earn 0.40% APY

  • No fees
  • No minimum opening deposit
  • No minimum balance required
Axos Bank
Member FDIC

High Yield Savings and Essential Checking - $100 Bonus

For a limited time, get a $100 bonus1 when you open a High Yield Savings account and Essential Checking account when you use promo code GET100.

Axos Bank
Member FDIC

High Yield Savings

  • 0.61% APY on balance < $25,000
  • 0.25% APY on balance $25K-$100K
  • 0.15% APY on balance > $100K
  • No minimum balance requirements
  • No fees to open or maintain account
  • Free ATM card upon request
  • FDIC Insured

Betterment Cash Reserve - Earn up to 0.30% APY

  • FDIC insurance covering up to $1,000,000 at program banks
  • Access cash in 1-2 business days
  • No minimum balance
  • No fees on balance
  • Unlimited withdrawals
UFB Direct

UFB High Yield Savings - Earn up to 0.20% APY

  • Earn 0.20% APY on balances of $10,000 and above
  • Member FDIC

Good: Money Market Account

A money market account is like a hybrid of a savings and a checking account. Unlike most online savings accounts, an MMA comes with check-writing abilities and an ATM card.

However, the minimum balance requirement is usually higher.

Why it works:

  • Easily accessible: Usually come with debit/ATM card access and checks
  • Safe/low-risk: FDIC- or NCUA-insured; none of the risk of an investment
  • Good for higher balances: You'll likely clear the minimum balance requirement (usually $2K-$3.5K)
  • Reliable interest returns: APY usually ranges from 0.01% to 0.7%
  • Minimal fees: Most monthly service fees can be avoided by maintaining a minimum balance

Don't confuse a money market account with a money market fund. Money market funds are invested in securities. Though they're usually low risk, they're still subjected to market risk, and therefore loss of value. They're also not insured by the FDIC.

What money market account should I put my emergency fund in?

CIT Bank
Member FDIC

CIT Bank Money Market Account - 0.45% APY

  • 0.45% APY
  • $100 minimum opening deposit
  • No monthly maintenance fee
  • FDIC insured
Discover Bank
Member FDIC

Money Market Account

  • Earn 0.30% APY for balances under $100,000
  • Earn 0.35% APY for balances $100,000 and over
Axos Bank
Member FDIC

High Yield Money Market - 0.25% APY

  • 0.25% APY on all balance tiers
  • No minimum balance requirements
  • No fees to open or maintain account
  • Free Visa debit card
  • Free online bill pay, free limited checks, and free limited online check images
  • FDIC Insured
UFB Direct

UFB Premium Money Market - Earn 0.20%

  • Earn 0.20% APY on balances of $25,000 and above
  • Member FDIC
CIT Bank
Member FDIC

CIT Bank Money Market Account

  • Earn over 7x the national average
  • New customers can apply online with a minimum of $100 to open an account
  • Fund the account with electronic transfer, mail in check, or wire transfer
  • No monthly service fees
  • Deposit checks remotely and make transfers with the CIT Bank mobile app
  • FDIC insured
CIT Bank
Member FDIC

Earn 7.5x National Average

Save smart and earn 0.45% APY at CIT Bank, a CreditDonkey recommended partner.

So-so: Certificate of Deposit

Unlike a normal savings account (where you can deposit and withdraw funds), CDs require you to deposit a fixed amount of money for a fixed amount of time.

You get a set interest rate that will be honored for the duration of that term.

Why it works:

  • Safe/low-risk: CDs are insured by the FDIC or NCUA
  • Higher, fixed APYs: Rates are guaranteed and range from 0.3% to 0.9%
  • Good for windfalls: Good option if you already have your fund amount
  • No monthly fees: Most CDs don't have monthly fees

Why it doesn't work:

  • Not accessible: Balance is "locked away" for a fixed period (usually 3 months to 5 years)
  • Early withdrawal penalties: Fined if you withdraw before the maturity date
  • Not good for slow saving: Most CDs don't allow you to make regular deposits
  • Higher minimum deposit: Sometimes as much as $1,000

What CD should I put my emergency fund in?

CIT Bank
Member FDIC

CIT Bank Term CDs

  • Up to 0.50% APY
  • $1,000 minimum opening deposit
  • No monthly maintenance fee
  • FDIC insured
TermCD Rates
6 Month0.30% APY
1 Year0.30% APY
13 Month0.30% APY
18 Month0.30% APY
2 Year0.40% APY
3 Year0.40% APY
4 Year0.50% APY
5 Year0.50% APY
Discover Bank
Member FDIC

Certificate of Deposit

  • 0.50% APY for 12-month term
  • 0.55% APY for 36-month term
  • 0.60% APY for 5-year term
Continental Bank

High Yield CD - Earn up to 0.70%

  • 0.70% APY for 45-month term
  • 0.45% APY for 6-month term
Continental Bank

No Penalty CD - Earn up to 0.45% APY

  • 0.45% APY for 11-month term
  • 0.40% APY for 3-month term
CIT Bank
Member FDIC

CIT Bank No Penalty CD

  • 0.30% APY
  • Option to withdraw full balance and interest after 7 days of CD funding date
  • $1,000 minimum to open an account
  • 11 months
  • No monthly maintenance fee
  • FDIC insured
CIT Bank
Member FDIC

CIT Bank Jumbo CDs

  • Up to 0.50% APY
  • $100,000 minimum opening deposit
  • No monthly maintenance fee
  • FDIC insured
TermCD Rates
2 Year0.40% APY
3 Year0.40% APY
4 Year0.50% APY
5 Year0.50% APY
Discover Bank
Member FDIC

Discover CD Rates

  • $2,500 minimum opening deposit
  • No fees
  • FDIC insured
TermCD Rates
3 Months0.20% APY
6 Months0.25% APY
9 Months0.30% APY
1 Year0.50% APY
1.5 Years0.50% APY
2 Years0.50% APY
2.5 Years0.55% APY
3 Years0.55% APY
4 Years0.55% APY
5 Years0.60% APY
7 Years0.60% APY
10 Years0.60% APY

Bad Places to Keep Your Emergency Fund

  • Bad: Stocks or Bonds
    Not only are these illiquid options that make your money less accessible, but they also come with risk. Plus, if you were to lose your job due to a bad economy, it's likely the stock market is in bad shape, too.

  • Bad: Cash Hidden at Home
    Money stashed at home is always subject to risk (like theft or fires) and is also not insured by the FDIC or NCUA. On top of that, you'll earn nothing in interest, meaning your cash won't keep up with inflation.

  • Very Bad: Relying on Credit Cards
    Credit cards come with high APRs that could put you further in debt. When you're faced with an emergency expense, the last thing you want is to pay that money back with 25% interest.

Should I keep my emergency fund in a Roth IRA?
Putting your emergency fund in a Roth IRA has its pros and cons. What's good is that you can withdraw the funds at any time with no taxes or penalties. However, that's only if the money is being used for specific reasons. If not, you may still face a penalty. Another downside is that it's not a risk-free investment. However, there may be a benefit to putting a portion of your fund in a Roth IRA - keep reading to learn more about this option.

How Much Should I Have in My Emergency Fund?

Some people recommend saving anywhere between 3 and 12 months' worth of expenses. But that might still come up short.

This calculator shows you:

  1. How much your emergency fund should be, based on your expenses and risk factors
  2. How much you should save each month
  3. How long it will take to save up your fund

Want the background on how this calculator works? Check out our guide on emergency funds.

How much is too much in an emergency fund?
Bigger isn't always better. It's probably safe to cap your fund when you have 1 year's worth of expenses. At that point, try to prioritize investing and paying off debt to make your money go further.

How to Start Saving for Your Emergency Fund

The best way to save is by making regular contributions.

If you can't commit to saving a fixed amount every month, making any contributions at all is the smartest thing you can do. In this case, consistency beats quantity.

But say you're the type who prefers a solid number, or at least a guideline. If so, turn to the 50/30/20 Rule. Not only does it tell you how much to save, but it gives you an idea of how much you should be spending on necessities and "fun stuff."

Here's how it works:

  • 50% for necessities: Things like housing, car costs, electricity, and basic food.

  • 30% for fun spending: This is your wants, such as eating out, movies, shopping, gym membership, etc.

  • 20% for savings: To be split up between retirement savings and other goals. We'll go into more detail below.

50/30/20 Calculator

Remember that this is to be calculated with your after-tax (take-home) income.

Finding Extra Money for Your Emergency Fund
If you struggle to save 20% of your income, try one of these ideas to free up more cash and fund your emergency account faster.

  1. Cut down expenses & hidden fees: Take stock of your recurring costs and trim what's not crucial with an app like Trim or Truebill.
  2. Stash bonuses or refunds: Just got a shiny tax refund? Adding it to your emergency fund is the best way to go.
  3. Sell things you no longer want: Unload old clothes or even your used DVDs and stash the cash.
  4. Earn with cash-back or side-hustles: Optimize your purchases with cash back apps or earn a little money on the side. It's not a lot, but it'll add up.

Emergency Fund FAQs

Should I save, invest, or pay off debt?
Paying down debt is important, but don't worry about having all your debt paid off before you start saving. If you run into an emergency, you'll want to pull from savings before using a credit card.

Once your debt is manageable and you've set aside a healthy savings, consider investing your money in a diversified portfolio.

Should I keep emergency cash?
It's smart to keep some emergency cash just in case banking institutions aren't accessible. Consider what you'd need to cover food, transportation, or other necessities for 3-5 days.

Also try to have an assortment of bills, like $5s, $10s, and $20s instead of larger notes like $100s.

Should I invest my emergency fund when rates are low?
When interest rates are below the rate of inflation (which is usually around 1-3%), you might consider putting a portion of your fund in a more lucrative account, like a Roth IRA.

This way, you can reap the benefits of higher returns while still being able to easily access some money in a savings account.

What should I use my emergency fund for?
If the emergency situation involves someone's health, livelihood, home, car, or financial well-being, using your emergency fund is probably fair game. These examples would be a good use of your fund:

  • Protection after job loss
  • Home or auto repairs
  • Medical or dental bills
  • Unexpected tax bill
  • Emergency travel expenses

Bottom Line

In general, we recommend putting your emergency fund in a safe, accessible spot like a high-yield savings account or a money market account. Remember: emergencies usually come unannounced. So you'll want to make sure you can get to that money quickly and easily.

When saving up your fund, just try to make contributions as regularly as you can. Consider setting up automatic transfers from your main checking account to get started.

Holly Zorbas is a guardian of content and community at CreditDonkey, a personal finance comparison and reviews website. Write to Holly Zorbas at holly.zorbas@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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