Emergency Fund...Savings, Money Market, or CD?

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stlbrucefan
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Emergency Fund...Savings, Money Market, or CD?

Post by stlbrucefan » Wed Mar 22, 2017 10:39 am

I currently have about 4-5 months living expenses sitting in a Capital One 360 savings account (.75% interest) that I use as an emergency fund. I touch this money and don't foresee needing to use it in the near future (never know for sure, but that is the plan).

Capital One also has a money market account that currently pays 1% interest with a 10k minimum, a 2 year CD that pays 1.6% and a 5 year CD that pays 2.3%.

Any advice? Like I said, I hope to not have to touch this money for anything unless a true emergency. I have another savings account with 360 that I use for home/car repairs, vacations, etc, and an HSA that could cover my out-of-pocket max for the year in the case of a health issue, meaning the only reason I would plan to use my emergency fund is in the case of a job loss. I know there are higher rates out there, but unless something jumps at me, I'd rather just keep the convenience of Capital One.

Should I keep as is, move to a money market, move some to a CD?

Thanks in advance!

Gufomel
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Gufomel » Wed Mar 22, 2017 10:42 am

This question was just asked a few minutes ago - and probably every few minutes in the history of this forum for that matter :)

viewtopic.php?f=1&t=214446&newpost=3293041

Ally has a 1% savings account with no minimum. There's other comparable options out there.

Crisium
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Crisium » Wed Mar 22, 2017 10:48 am

Some good websites:

http://www.doctorofcredit.com/high-inte ... gs-to-get/
https://www.depositaccounts.com/

If you don't mind a lot of hoop jumping, the various rewards checking accounts can offer high rates. For no-nonsense, 1.25% appears to be the high end.

stlbrucefan
Posts: 46
Joined: Tue Feb 28, 2017 10:31 am

Re: Emergency Fund...Savings, Money Market, or CD?

Post by stlbrucefan » Wed Mar 22, 2017 11:18 am

Gufomel wrote:This question was just asked a few minutes ago - and probably every few minutes in the history of this forum for that matter :)

viewtopic.php?f=1&t=214446&newpost=3293041

Ally has a 1% savings account with no minimum. There's other comparable options out there.
I saw this immediately after I posted....whoops!

Atgard
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Atgard » Wed Mar 22, 2017 4:08 pm

Just a note -- thanks to another post on here, it showed that the 5-year CD at 2.3% beats the 2-year CD in almost all scenarios, even factoring in the 6-month early withdrawal penalty. See here:

https://www.depositaccounts.com/tools/e ... 244,265245

Code: Select all

Term	 12 mo	24 mo	36 mo	48 mo	60 mo
APY	  1.30%	1.60%	1.60%	1.80%	2.30%
Penalty  3 mo	6 mo	 6 mo 	6 mo	 6 mo
1 Year	1.30%	0.80%	0.80%	0.90%	1.15%
2 Years	       1.60%	1.20%	1.36%	1.73%
3 Years			         1.60%	1.51%	1.93%
4 Years			                 1.80%	2.03%
5 Years				                	   2.30%

betablocker
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by betablocker » Wed Mar 22, 2017 4:48 pm

stlbrucefan wrote:I currently have about 4-5 months living expenses sitting in a Capital One 360 savings account (.75% interest) that I use as an emergency fund. I touch this money and don't foresee needing to use it in the near future (never know for sure, but that is the plan).

Capital One also has a money market account that currently pays 1% interest with a 10k minimum, a 2 year CD that pays 1.6% and a 5 year CD that pays 2.3%.

Any advice? Like I said, I hope to not have to touch this money for anything unless a true emergency. I have another savings account with 360 that I use for home/car repairs, vacations, etc, and an HSA that could cover my out-of-pocket max for the year in the case of a health issue, meaning the only reason I would plan to use my emergency fund is in the case of a job loss. I know there are higher rates out there, but unless something jumps at me, I'd rather just keep the convenience of Capital One.

Should I keep as is, move to a money market, move some to a CD?

Thanks in advance!
Invest the money. Feels like way too much cash losing ground to inflation. Worst case you lose 50% if you are 100% equities. Or you definitely lose 2-3% per year. Unless you are 100% equities I don't see the need.

Crisium
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Crisium » Thu Mar 23, 2017 1:02 pm

Atgard wrote:Just a note -- thanks to another post on here, it showed that the 5-year CD at 2.3% beats the 2-year CD in almost all scenarios, even factoring in the 6-month early withdrawal penalty. See here:

https://www.depositaccounts.com/tools/e ... 244,265245

Code: Select all

Term	 12 mo	24 mo	36 mo	48 mo	60 mo
APY	  1.30%	1.60%	1.60%	1.80%	2.30%
Penalty  3 mo	6 mo	 6 mo 	6 mo	 6 mo
1 Year	1.30%	0.80%	0.80%	0.90%	1.15%
2 Years	       1.60%	1.20%	1.36%	1.73%
3 Years			         1.60%	1.51%	1.93%
4 Years			                 1.80%	2.03%
5 Years				                	   2.30%
Interesting. Early Withdrawal can be denied though, correct?

I_Am_Not_A_Doctor
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by I_Am_Not_A_Doctor » Thu Mar 23, 2017 1:12 pm

With our emergency fund, I don't go all-in on one vehicle. I keep a portion always in cash (if I needed it like "right now"). I keep the rest in CD ladders (3-month intervals). Thus "cash" is coming free periodically, and I can use it then if needed or reinvest in another tranche of the CD ladder. This may not give me the most optimal interest at all times... but this is my emergency fund. I'm not necessarily trying to max every dollar off of this fund, just keep it safe (no loss of capital, FDIC protected, etc.) and available if needed.

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TF Hutch
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by TF Hutch » Thu Mar 23, 2017 4:15 pm

KISS (keep it simple stupid) :happy I prefer simplicity.

Emergency funds need to be liquid, need to be safe, need to be simple.
Therefore, I recommend an FDIC insured Bank account. Ally Bank 1% Online Savings account meets these requirements. :

For longer term emergency savings I suggest Roth IRA. Contributions (not earnings) can be removed tax free at anytime. :sharebeer
Hutch | A fool and his funds are soon parted! - Thomas Tusser (English Farmer and Writer. 1524-1580)

sawhorse
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by sawhorse » Fri Mar 24, 2017 10:26 am

Also look into I bonds for part of your emergency fund. Not all of it as they can't be redeemed for a year.

If you're using your Roth as a primary emergency fund, I recommend myRA. It gives you access to the G Fund that is currently crediting 2.375% with no chance of loss.

mcraska
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by mcraska » Fri Mar 24, 2017 2:53 pm

I'm a fan of taking the total amount you want to have in your emergency fund add 30% in order to withstand drops in the market and save in 50:50 AA of equities and bonds. I can't stomach having 4-5 months expenses earning 1%.

drawpoker
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by drawpoker » Fri Mar 24, 2017 4:10 pm

stlbrucefan wrote:Should I keep as is, move to a money market, move some to a CD?
None of the above

Put it in VG GinnieMae Fund - $3,000 minimum to open account - free check writing ($250 minimum per check) very low cost e.r., and current SEC yield 2.48%
If you want to take on a little more risk VG Intermediate Bond Index Fund - current SEC yield 2.78%

Forget about Banks, CD's and other FDIC "protection" - that's your Grandfather's Oldsmobile thinking :wink:

gvsucavie03
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by gvsucavie03 » Fri Mar 24, 2017 4:13 pm

We have a LMCU Max Checking account that earns 3% on up to $15,000. Must have DD, 10 debit and 4 online logins per month. We also have an Ally MMA earning .85%.

Atgard
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Atgard » Fri Mar 24, 2017 7:59 pm

Crisium wrote:
Atgard wrote:Just a note -- thanks to another post on here, it showed that the 5-year CD at 2.3% beats the 2-year CD in almost all scenarios, even factoring in the 6-month early withdrawal penalty. See here:

https://www.depositaccounts.com/tools/e ... 244,265245

Code: Select all

Term	 12 mo	24 mo	36 mo	48 mo	60 mo
APY	  1.30%	1.60%	1.60%	1.80%	2.30%
Penalty  3 mo	6 mo	 6 mo 	6 mo	 6 mo
1 Year	1.30%	0.80%	0.80%	0.90%	1.15%
2 Years	       1.60%	1.20%	1.36%	1.73%
3 Years			         1.60%	1.51%	1.93%
4 Years			                 1.80%	2.03%
5 Years				                	   2.30%
Interesting. Early Withdrawal can be denied though, correct?
Theoretically, maybe. I haven't heard many instances in practice of banks actually refusing it.

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Toons
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Toons » Fri Mar 24, 2017 8:05 pm

As someone else said.
Invest the money.
Vanguard Balanced Index Fund. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Kencufc
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Kencufc » Fri Mar 24, 2017 8:46 pm

I don't know what tax bracket you are in but I keep a portion of my emergency fund in intermediate term municipal bond funds. We are in t high bracket and its value is relatively stable. I keep at least $5k on hand just in a savings that is immediately accessible.

Sandi_k
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Sandi_k » Sun Mar 26, 2017 1:43 pm

Would the advice above be different if it's just "excess" cash?

- We have an Emergency Fund of 6 months.
- We cannot contribute to Roths, unless we do backdoor Roths, and we have other IRAs that complicate that route.
- DH has funds he'd like to move from a WF savings account, into something that is "safe". It's a small inheritance pool that he doesn't want to "lose" (e.g., invest in the stock market).
- I think perhaps a 2% CD ladder would be reasonable - FDIC insured, reasonable floor of return without market risk. (Sorry, drawpoker, he *is* a grandfather about risk). ;)

Any other suggestions?

Geologist
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by Geologist » Sun Mar 26, 2017 1:48 pm

I_Am_Not_A_Doctor wrote:With our emergency fund, I don't go all-in on one vehicle. I keep a portion always in cash (if I needed it like "right now"). I keep the rest in CD ladders (3-month intervals). Thus "cash" is coming free periodically, and I can use it then if needed or reinvest in another tranche of the CD ladder. This may not give me the most optimal interest at all times... but this is my emergency fund. I'm not necessarily trying to max every dollar off of this fund, just keep it safe (no loss of capital, FDIC protected, etc.) and available if needed.
I agree with this basic approach (a portion in a cash account; the rest in laddered CD's at short intervals). Exactly how you divide the portions depends on your circumstances.

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dm200
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by dm200 » Sun Mar 26, 2017 2:50 pm

drawpoker wrote:
stlbrucefan wrote:Should I keep as is, move to a money market, move some to a CD?
None of the above
Put it in VG GinnieMae Fund - $3,000 minimum to open account - free check writing ($250 minimum per check) very low cost e.r., and current SEC yield 2.48%
If you want to take on a little more risk VG Intermediate Bond Index Fund - current SEC yield 2.78%
Forget about Banks, CD's and other FDIC "protection" - that's your Grandfather's Oldsmobile thinking :wink:
Be aware that the Vanguard GNMA Fund is subject to relatively significant (for an emergency fund) loss (or gain) in a short period. The NAV (and your fund in the GNMA) can easily drop 10% in a few months. It might even drop more than that. As an example, the NAV range of the Vanguard GNMA Admiral class is currently $10.50. Its 12 month high and low are 10.88 on 10/03/2016 and 10.39 on 3/14/2017. This is a range of 4.5%.

drawpoker
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by drawpoker » Sun Mar 26, 2017 8:46 pm

Yeah, but this is supposed to be an Emergency Fund - OP won't be tapping the money unless something dire happens.

So, every month he is buying more shares (re-investing all dividends) Even as GinnieMae funds NAV prices may drop (as they have been doing for months) the amount of the dividends (per share amount) will be increasing.

Beats the other choices by a mile. For me, anyway.

boglerdude
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by boglerdude » Mon Apr 03, 2017 12:09 am

Any other pros/cons for using Vanguard GNMA as part of emergency fund?

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whodidntante
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by whodidntante » Mon Apr 03, 2017 12:14 am

Your entire portfolio is your emergency fund. Invest and plan for the known, not the unknown. Bump up your fixed income allocation if you are exceeding your risk tolerance. CDs are fine, just consider those part of your fixed income allocation.

gvsucavie03
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Re: Emergency Fund...Savings, Money Market, or CD?

Post by gvsucavie03 » Mon Apr 03, 2017 6:30 pm

One should have liquid, availabor cash as a prerequisite to investing. Large EF's could have CD ladders or short-term bond funds built in tiers, but I strongly feel there needs to be a cash cushion. I don't consider my FI allocation as part of my EF or vice versa. My EF is completely separate.

I do use parts of my EF to get bank bonuses. It is a far better rate of return than a MMA or CD.

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