Interest Earned on Emergency Fund

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OnBoard
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Joined: Mon Feb 18, 2013 12:28 am

Interest Earned on Emergency Fund

Post by OnBoard »

What do you do with the interest earned on your emergency fund?

Like many of you, my emergency fund is with Ally. Should I let it accumulate while expenses remain constant, or should I invest according to AA?
PS241
Posts: 41
Joined: Wed Jan 02, 2013 10:49 pm

Re: Interest Earned on Emergency Fund

Post by PS241 »

I leave it in and figure it's a (slight) hedge against inflation.
livesoft
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Re: Interest Earned on Emergency Fund

Post by livesoft »

I take all 4 cents of it and buy shares in Vanguard Total Stock Market Index unless I lose it in the couch cushions first.
Last edited by livesoft on Tue Sep 17, 2013 5:57 pm, edited 1 time in total.
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momar
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Re: Interest Earned on Emergency Fund

Post by momar »

Your expenses are at least partially tied to inflation. If you maintain an EF to cover X months of expenses, then you need to add to your EF every month. Probably beyond whatever interest you are getting.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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tylerdurden
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Re: Interest Earned on Emergency Fund

Post by tylerdurden »

I move the earned interest into my regular checking account every few months. The saving account is only making 0.85%, so there isn't much accumulation.
"The things you own end up owning you." -TD
Texas hold em71
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Re: Interest Earned on Emergency Fund

Post by Texas hold em71 »

I move it to checking.

I reassess my EF periodically and have seen no inflationary reason to grow it over the last three years.
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mike143
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Re: Interest Earned on Emergency Fund

Post by mike143 »

My emergency funds is invested so I let it grow.
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Shaudius
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Re: Interest Earned on Emergency Fund

Post by Shaudius »

Why not keep the emergency fund in a rewards checking account. It doesn't seem like too much trouble to make 10 transactions a month in exchange for some extra interest. I don't see the point in keeping money in something that's no better, and gains less interest.
redhounds
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Re: Interest Earned on Emergency Fund

Post by redhounds »

Shaudius wrote:Why not keep the emergency fund in a rewards checking account. It doesn't seem like too much trouble to make 10 transactions a month in exchange for some extra interest. I don't see the point in keeping money in something that's no better, and gains less interest.
I agree that it's worth the trouble, but with most of the reward checking accounts having a fairly low amount that they pay the higher interest rate on, the extra interest isn't exactly a windfall. My reward checking pays the higher interest rate on the first $25,000 and then only 0.1% on any additional money in the account. I try to keep my average balance right at $25,000 and keep any additional cash in an online savings account like ING, Smartypig, etc. or invested per my IPS.
--Red
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