Where to stash your emergency fund

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fiverus
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Joined: Wed Jan 04, 2017 11:56 am

Where to stash your emergency fund

Post by fiverus » Tue Aug 22, 2017 11:13 am

Hello everyone,

Money market funds are a great choice because they're safe investments with values that don't change from day to day. Right now, I have $1,700k (not a lot) just starting a emergency fund with Ally Bank, money market, annual percentage yield 0.85%. I thought I would ask you folks since there are many knowledgeable people on here if there are other opportunities to consider.

What is your opinion?

Thank you,

sport
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Location: Cleveland, OH

Re: Where to stash your emergency fund

Post by sport » Tue Aug 22, 2017 11:23 am

fiverus wrote:
Tue Aug 22, 2017 11:13 am
Hello everyone,

Money market funds are a great choice because they're safe investments with values that don't change from day to day. Right now, I have $1,700k (not a lot) just starting a emergency fund with Ally Bank, money market, annual percentage yield 0.85%. I thought I would ask you folks since there are many knowledgeable people on here if there are other opportunities to consider.
I believe Ally has savings accounts that yield more than that.

fiverus
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Re: Where to stash your emergency fund

Post by fiverus » Tue Aug 22, 2017 11:29 am

I checked my money market account. 0.85%

chevca
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Re: Where to stash your emergency fund

Post by chevca » Tue Aug 22, 2017 11:30 am

Yep, Ally has an online savings account giving 1.15% APY. You can also use the MM account there. I have both with Ally. A few years ago the MM account had a slightly better APY and now the online savings does.

Your total of $1,700k sure sounds like a lot. :happy :wink:

omgbirdman
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Re: Where to stash your emergency fund

Post by omgbirdman » Tue Aug 22, 2017 11:31 am

You should instead put that money in an Ally Online savings account, which has a yearly rate of 1.15%.

fiverus
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Re: Where to stash your emergency fund

Post by fiverus » Tue Aug 22, 2017 11:38 am

I will give Ally a call. Thank you everyone for your input.

Any other suggestions welcome.

inbox788
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Re: Where to stash your emergency fund

Post by inbox788 » Tue Aug 22, 2017 12:07 pm

fiverus wrote:
Tue Aug 22, 2017 11:38 am
I will give Ally a call. Thank you everyone for your input.

Any other suggestions welcome.
Your $1700 generates around $17 interest a year. Increasing it by 15% is going to net you $0.25 more a year. The cost to Ally to field your call is going to exceed that, probably by a fair bit more. No wonder they're not raising interest rates much.
It costs about $1 per minute for the average call center to service a customer.
http://mashable.com/2012/04/24/call-cen ... eyTnxWPZqI

Let's hope 100 other people don't have to waste time calling and still get their $0.25 a year increase. Or you and other folks are able to scale this newfound knowledge 100 fold to make it more efficient. I guess if you keep your account open for 100 years, the call may pay off for Ally.

sport
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Re: Where to stash your emergency fund

Post by sport » Tue Aug 22, 2017 1:01 pm

inbox788 wrote:
Tue Aug 22, 2017 12:07 pm
fiverus wrote:
Tue Aug 22, 2017 11:38 am
I will give Ally a call. Thank you everyone for your input.

Any other suggestions welcome.
Your $1700 generates around $17 interest a year. Increasing it by 15% is going to net you $0.25 more a year. The cost to Ally to field your call is going to exceed that, probably by a fair bit more. No wonder they're not raising interest rates much.
It costs about $1 per minute for the average call center to service a customer.
http://mashable.com/2012/04/24/call-cen ... eyTnxWPZqI

Let's hope 100 other people don't have to waste time calling and still get their $0.25 a year increase. Or you and other folks are able to scale this newfound knowledge 100 fold to make it more efficient. I guess if you keep your account open for 100 years, the call may pay off for Ally.
I believe you are off a decimal point.

mega317
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Re: Where to stash your emergency fund

Post by mega317 » Tue Aug 22, 2017 1:49 pm

Your time is better served finding something in your house you don't need and selling on ebay than worrying about this.

fiverus
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Re: Where to stash your emergency fund

Post by fiverus » Tue Aug 22, 2017 1:58 pm

can't I do both?

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tc101
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Re: Where to stash your emergency fund

Post by tc101 » Tue Aug 22, 2017 1:58 pm

You can get 1.1% with vanguard prime MMF.
. | The most important thing you should know about me is that I am not an expert.

sport
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Re: Where to stash your emergency fund

Post by sport » Tue Aug 22, 2017 2:16 pm

tc101 wrote:
Tue Aug 22, 2017 1:58 pm
You can get 1.1% with vanguard prime MMF.
$3000 minimum purchase.

mega317
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Re: Where to stash your emergency fund

Post by mega317 » Tue Aug 22, 2017 2:34 pm

Ok well my post was rather flippant and intended to illustrate the meaninglessness of the exercise.
I will answer your question if there are other opportunities to consider.
1. Higher yielding savings or money market fund. DO NOT call Ally, just open the account online. Moving from 0.85% to 1.15% gains you 5 dollars a year (minus tax!).
2. Rewards checking--higher yield in exchange for jumping through some hoops.
3. CDs. An example is Ally's 5 year CD which, when considering the early withdrawal penalty, will best their savings rate of 1.15% if you hold at least 11 months. Some risk here if you need the money sooner.
4. Bond funds, specifically short-term bond funds. Also risk in your initial investment for slightly higher yield.

If I was starting out and my emergency fund was $1700 I would want no risk and I would choose #1. If you have a lot of free time you can choose #2.
Do you really not have better things to do with your time? (Says the guy posting a response on the internet on a Tuesday afternoon)

Also do you have earned income? Contribute the money to a Roth, from which contributions can be withdrawn tax- and penalty-free. In that case I would go with Vanguard and use VMMXX.
Edit: Didn't think about the VMMXX minimum. What does Vanguard do with <3k cash in an IRA? VMFXX, and the minimum is waived as a settlement fund?

fiverus
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Re: Where to stash your emergency fund

Post by fiverus » Tue Aug 22, 2017 2:58 pm

ok. I think I will call Ally now. Thanks for the advice.

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John151
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Re: Where to stash your emergency fund

Post by John151 » Tue Aug 22, 2017 3:05 pm

I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.

vbdoug
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Re: Where to stash your emergency fund

Post by vbdoug » Tue Aug 22, 2017 11:11 pm

I use savings accounts at PurePoint that pays 1.30% and the American Airlines Federal Credit Union that pays 1.25%. I had some 60 month CDs with American that just matured but for an extra percentage point I prefer the convenience and accessibility of a saving account

IvestForEngineers
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Re: Where to stash your emergency fund

Post by IvestForEngineers » Wed Aug 23, 2017 1:52 am

fiverus wrote:
Tue Aug 22, 2017 11:13 am
Hello everyone,

Money market funds are a great choice because they're safe investments with values that don't change from day to day. Right now, I have $1,700k (not a lot) just starting a emergency fund with Ally Bank, money market, annual percentage yield 0.85%. I thought I would ask you folks since there are many knowledgeable people on here if there are other opportunities to consider.

What is your opinion?

Thank you,
I use only I-bonds ( bought directly from treasury web site - limit 10k per SSN per calendar year )

Kencufc
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Re: Where to stash your emergency fund

Post by Kencufc » Wed Aug 23, 2017 9:57 pm

I'm a fan of muni funds, either bonds or money market. In higher tax bracket these are beneficial. However, the real benefit of emergency fund is knowing it's there. It buys you sleep and peace of mind. Not having an emergency fund in an investment enables you to access money in an instant and not fret about whether you are selling low or bailing too early.

scrabbler1
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Re: Where to stash your emergency fund

Post by scrabbler1 » Thu Aug 24, 2017 8:31 am

Kencufc wrote:
Wed Aug 23, 2017 9:57 pm
I'm a fan of muni funds, either bonds or money market. In higher tax bracket these are beneficial. However, the real benefit of emergency fund is knowing it's there. It buys you sleep and peace of mind. Not having an emergency fund in an investment enables you to access money in an instant and not fret about whether you are selling low or bailing too early.
I have layers, or tiers, of emergency funds. My first tier is about $500-$750 extra in my local bank's checking account beyond the minimum balance requirement to avoid monthly account fees. This account generates no interest, as I can get from an ATM or if I need to write a check stemming from a small, unforeseen expense, and I tap into this fairly often.

My next tier is $40k in a national muni bond fund. It generates just over 2% annually and is mostly tax-free. I hate tying up a large amount of money in something which generates nearly nothing in interest. This bond fund also has checkwriting privileges which makes it a little more readily accessible than other bond funds I own. I average maybe one check per year on the account and often go many years without writing one (the last was in 2012). This bond fund is available to cover larger, less frequent, unforeseen expenses.

student
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Re: Where to stash your emergency fund

Post by student » Thu Aug 24, 2017 8:37 am

My emergency fund (about 5% of my investment) is in an CD with a reasonable early withdrawal penalty.

crazcarl
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Re: Where to stash your emergency fund

Post by crazcarl » Thu Aug 24, 2017 9:16 am

My emergency fund is in my Credit card. My family gets a paycheck every week, from either my job or my wife's. We also get rental income, and side business income. It really does pay to have multiple streams of income. I try not to have more than $500 in my checking account.

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flamesabers
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Re: Where to stash your emergency fund

Post by flamesabers » Thu Aug 24, 2017 9:44 am

John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
Same here. It's convenient for me, and it's not like I'm storing a huge chunk of cash in the money market fund.

Kencufc
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Re: Where to stash your emergency fund

Post by Kencufc » Thu Aug 24, 2017 8:42 pm

scrabbler1 wrote:
Thu Aug 24, 2017 8:31 am
Kencufc wrote:
Wed Aug 23, 2017 9:57 pm
I'm a fan of muni funds, either bonds or money market. In higher tax bracket these are beneficial. However, the real benefit of emergency fund is knowing it's there. It buys you sleep and peace of mind. Not having an emergency fund in an investment enables you to access money in an instant and not fret about whether you are selling low or bailing too early.
I have layers, or tiers, of emergency funds. My first tier is about $500-$750 extra in my local bank's checking account beyond the minimum balance requirement to avoid monthly account fees. This account generates no interest, as I can get from an ATM or if I need to write a check stemming from a small, unforeseen expense, and I tap into this fairly often.

My next tier is $40k in a national muni bond fund. It generates just over 2% annually and is mostly tax-free. I hate tying up a large amount of money in something which generates nearly nothing in interest. This bond fund also has checkwriting privileges which makes it a little more readily accessible than other bond funds I own. I average maybe one check per year on the account and often go many years without writing one (the last was in 2012). This bond fund is available to cover larger, less frequent, unforeseen expenses.
Do you figure this account into your asset allocation percentages, or just treat as a separate entity? Using the Personal Captial software, my bond percentage looks quite high with the muni fund but I tend to think it doesn't count in the overall asset allocation.

zimrod
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Re: Where to stash your emergency fund

Post by zimrod » Thu Aug 24, 2017 9:48 pm

John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?

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flamesabers
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Re: Where to stash your emergency fund

Post by flamesabers » Thu Aug 24, 2017 11:08 pm

zimrod wrote:
Thu Aug 24, 2017 9:48 pm
John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?
I use Vanguard Municipal Money Market Fund (VMSXX). It has a lower yield then the other money markets, but the municipal fund is tax-exempt unlike its counterparts.

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John151
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Re: Where to stash your emergency fund

Post by John151 » Thu Aug 24, 2017 11:44 pm

Vanguard also offers a Prime Money Market Fund, a Federal Money Market Fund, and a Treasury Money Market Fund. I think that any of Vanguard’s money market funds would be a reasonable choice for most investors.

scrabbler1
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Re: Where to stash your emergency fund

Post by scrabbler1 » Fri Aug 25, 2017 7:40 am

Kencufc wrote:
Thu Aug 24, 2017 8:42 pm
scrabbler1 wrote:
Thu Aug 24, 2017 8:31 am
Kencufc wrote:
Wed Aug 23, 2017 9:57 pm
I'm a fan of muni funds, either bonds or money market. In higher tax bracket these are beneficial. However, the real benefit of emergency fund is knowing it's there. It buys you sleep and peace of mind. Not having an emergency fund in an investment enables you to access money in an instant and not fret about whether you are selling low or bailing too early.
I have layers, or tiers, of emergency funds. My first tier is about $500-$750 extra in my local bank's checking account beyond the minimum balance requirement to avoid monthly account fees. This account generates no interest, as I can get from an ATM or if I need to write a check stemming from a small, unforeseen expense, and I tap into this fairly often.

My next tier is $40k in a national muni bond fund. It generates just over 2% annually and is mostly tax-free. I hate tying up a large amount of money in something which generates nearly nothing in interest. This bond fund also has checkwriting privileges which makes it a little more readily accessible than other bond funds I own. I average maybe one check per year on the account and often go many years without writing one (the last was in 2012). This bond fund is available to cover larger, less frequent, unforeseen expenses.
Do you figure this account into your asset allocation percentages, or just treat as a separate entity? Using the Personal Captial software, my bond percentage looks quite high with the muni fund but I tend to think it doesn't count in the overall asset allocation.
I count that muni bond fund holding as part of my total bond (fund) holding.

zimrod
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Re: Where to stash your emergency fund

Post by zimrod » Fri Aug 25, 2017 4:12 pm

flamesabers wrote:
Thu Aug 24, 2017 11:08 pm
zimrod wrote:
Thu Aug 24, 2017 9:48 pm
John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?
I use Vanguard Municipal Money Market Fund (VMSXX). It has a lower yield then the other money markets, but the municipal fund is tax-exempt unlike its counterparts.
Yes, doesn't it add more risk unlike say the Vanguard Federal Money Market Fund?

mega317
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Re: Where to stash your emergency fund

Post by mega317 » Fri Aug 25, 2017 4:27 pm

zimrod wrote:
Fri Aug 25, 2017 4:12 pm
flamesabers wrote:
Thu Aug 24, 2017 11:08 pm
zimrod wrote:
Thu Aug 24, 2017 9:48 pm
John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?
I use Vanguard Municipal Money Market Fund (VMSXX). It has a lower yield then the other money markets, but the municipal fund is tax-exempt unlike its counterparts.
Yes, doesn't it add more risk unlike say the Vanguard Federal Money Market Fund?
At current SEC yields you also need to be in the 33% bracket to see a net gain over VMFXX.

zimrod
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Re: Where to stash your emergency fund

Post by zimrod » Fri Aug 25, 2017 10:47 pm

zimrod wrote:
Fri Aug 25, 2017 4:12 pm
flamesabers wrote:
Thu Aug 24, 2017 11:08 pm
zimrod wrote:
Thu Aug 24, 2017 9:48 pm
John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?
I use Vanguard Municipal Money Market Fund (VMSXX). It has a lower yield then the other money markets, but the municipal fund is tax-exempt unlike its counterparts.
Yes, but doesn't it add more risk unlike say the Vanguard Federal Money Market Fund?

zimrod
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Re: Where to stash your emergency fund

Post by zimrod » Fri Aug 25, 2017 10:48 pm

mega317 wrote:
Fri Aug 25, 2017 4:27 pm
zimrod wrote:
Fri Aug 25, 2017 4:12 pm
flamesabers wrote:
Thu Aug 24, 2017 11:08 pm
zimrod wrote:
Thu Aug 24, 2017 9:48 pm
John151 wrote:
Tue Aug 22, 2017 3:05 pm
I keep my emergency money in a Vanguard money market fund. It doesn’t bother me that it’s paying very little. I just like knowing that it’s there if I need it.
What Money Market Fund do you use?
I use Vanguard Municipal Money Market Fund (VMSXX). It has a lower yield then the other money markets, but the municipal fund is tax-exempt unlike its counterparts.
Yes, doesn't it add more risk unlike say the Vanguard Federal Money Market Fund?
At current SEC yields you also need to be in the 33% bracket to see a net gain over VMFXX.
I was thinking the same exact thing.

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welderwannabe
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Re: Where to stash your emergency fund

Post by welderwannabe » Sat Aug 26, 2017 11:15 am

mega317 wrote:
Fri Aug 25, 2017 4:27 pm
At current SEC yields you also need to be in the 33% bracket to see a net gain over VMFXX.
The yield on the municipal money market has been quite variable as of late. It has varied from .80% a few weeks ago to .69% last week. It is back up to .70% as of a couple of days ago.

Right now I would be better off in prime, but next year I will be in the 39.6% bracket (43.4% on interest due to the ACA tax). I am just leaving it in the municipal money market.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

runrun
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Re: Where to stash your emergency fund

Post by runrun » Sat Aug 26, 2017 11:26 am

An intermediate term tax exempt fund works for me. Vanguards VWITX.

LeVolant
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Re: Where to stash your emergency fund

Post by LeVolant » Sat Aug 26, 2017 8:14 pm

Dan Egan from Betterment has an interesting take on Emergency Funds :

https://www.betterment.com/resources/pe ... -is-wrong/

As he summarizes :
  • Don’t keep your safety net fund in cash savings accounts. Odds are you’ll lose money due to inflation, and lose out on potential growth of your savings.
  • A smarter way is to invest 130 percent of your safety net in a moderate-risk portfolio. This ensures you keep your safety net fund available -- and growing.

zimrod
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Re: Where to stash your emergency fund

Post by zimrod » Mon Aug 28, 2017 8:20 am

LeVolant wrote:
Sat Aug 26, 2017 8:14 pm
Dan Egan from Betterment has an interesting take on Emergency Funds :

https://www.betterment.com/resources/pe ... -is-wrong/

As he summarizes :
  • Don’t keep your safety net fund in cash savings accounts. Odds are you’ll lose money due to inflation, and lose out on potential growth of your savings.
  • A smarter way is to invest 130 percent of your safety net in a moderate-risk portfolio. This ensures you keep your safety net fund available -- and growing.
Yeah, I've seen this before. The problem is what if you have a bad year in stocks or what about the up and down price of the NAV for intermediate term bond fund? An emergency fund is not an investment and is solely there as a cash reserve, nothing more. It is also there for you to withdraw from if need be so you don't have to touch your portfolio. As for keeping it up with the rate of inflation? Well, that is what your main portfolio is for. Your portfolio returns over time will offset what inflation will do to your EF.

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knpstr
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Re: Where to stash your emergency fund

Post by knpstr » Mon Aug 28, 2017 9:10 am

zimrod wrote:
Mon Aug 28, 2017 8:20 am
LeVolant wrote:
Sat Aug 26, 2017 8:14 pm
Dan Egan from Betterment has an interesting take on Emergency Funds :

https://www.betterment.com/resources/pe ... -is-wrong/

As he summarizes :
  • Don’t keep your safety net fund in cash savings accounts. Odds are you’ll lose money due to inflation, and lose out on potential growth of your savings.
  • A smarter way is to invest 130 percent of your safety net in a moderate-risk portfolio. This ensures you keep your safety net fund available -- and growing.
Yeah, I've seen this before. The problem is what if you have a bad year in stocks or what about the up and down price of the NAV for intermediate term bond fund? An emergency fund is not an investment and is solely there as a cash reserve, nothing more. It is also there for you to withdraw from if need be so you don't have to touch your portfolio. As for keeping it up with the rate of inflation? Well, that is what your main portfolio is for. Your portfolio returns over time will offset what inflation will do to your EF.
Yes, I think the article linked covered your concerns. While there is still a chance to be short on cash, it is unlikely, historically. Part of this is ameliorated by the suggestion of increasing the size of your emergency fund by 30%, which may rule this option out for some people.

I agree with your assessment that it is meant to be a reserve, not an investment. But I also understand how some people may want to be slightly more aggressive and not feel like they are losing money to inflation in "cash".
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

kite
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Re: Where to stash your emergency fund

Post by kite » Mon Aug 28, 2017 6:25 pm

Some of you guys are really missing out on a lot of potential interest. This requires a little more upfront work but it's worth it considering how much money you can have tied up as "emergency funds".

I put all my emergency funds into high interest (obviously FDIC ensured) online bank accounts. There's a lot of them and all of them have varying levels or hoops you have to jump through. The majority of them require a $1 ACH transfer every 2-3 months and a few of them have a couple extra rules.

I'm still in the process of fully utilizing these accounts but have roughly $35k in accounts earning 5% interest. By the time I'm done I'll have around $45-$50k all earning 5%. The other big benefit is I count this as part of the "bond" portion of my total portfolio which allows me a greater exposure in stocks in my 401k/roth/personal investment accounts.

If I run into the highly unlikely scenario where I need emergency funds and a credit card can't hold me over until my next pay day, and my couple thousand I leave in my bank can't hold me over, I can access any or all of these accounts in 2-3 business days.

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