Keeping emergency funds in high yield checking

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BrownEyedGirl_27
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Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:00 am

Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One? I’ve read on most finance blogs that it is a bad idea to keep emergency funds in checking accounts that you have easy access to, and I get it, but I’m not opposed to making some extra money off of my cash. I am pretty disciplined at not spending emergency funds on non-emergencies. I am more than happy to transfer $250 a month give or take into my Capital One account to keep the checking balance around $10k. Help please!
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:21 am

Bump for visibility
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

Triple digit golfer
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Re: Keeping emergency funds in high yield checking

Post by Triple digit golfer » Wed Mar 25, 2020 6:25 am

No reason not to use the checking for the first $10k if you're disciplined enough not to spend it.

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JoeRetire
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Re: Keeping emergency funds in high yield checking

Post by JoeRetire » Wed Mar 25, 2020 6:26 am

Sounds like you already have decided what you want to do.

Just remain disciplined and remember what emergency funds are for.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

Waiting_for_Godot
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Re: Keeping emergency funds in high yield checking

Post by Waiting_for_Godot » Wed Mar 25, 2020 6:27 am

I'd be surprised if Capital One, Ally, etc all keep their rates where they currently are, given the full percent rate cut ~2 weeks ago. As to the risk of putting money in a checking account... the only time I had an issue with fraudulent activity in checking, Wells Fargo was reasonably quick about getting a credit back in my account while they 'investigated' it.

Blue456
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Re: Keeping emergency funds in high yield checking

Post by Blue456 » Wed Mar 25, 2020 6:28 am

BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One? I’ve read on most finance blogs that it is a bad idea to keep emergency funds in checking accounts that you have easy access to, and I get it, but I’m not opposed to making some extra money off of my cash. I am pretty disciplined at not spending emergency funds on non-emergencies. I am more than happy to transfer $250 a month give or take into my Capital One account to keep the checking balance around $10k. Help please!
Up to you. Most people don't like keeping a lot of money in checking account because your account can be hacked by a compromised terminal. A dedicated savings account that's not swiped anywhere does not risk that. Now keep in mind that even if your account gets hacked, you can get your money back eventually back from a bank or credit union. How long it takes is anybody's guess. Having a separate emergency fund in savings account solves that issue.

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:38 am

Waiting_for_Godot wrote:
Wed Mar 25, 2020 6:27 am
I'd be surprised if Capital One, Ally, etc all keep their rates where they currently are, given the full percent rate cut ~2 weeks ago. As to the risk of putting money in a checking account... the only time I had an issue with fraudulent activity in checking, Wells Fargo was reasonably quick about getting a credit back in my account while they 'investigated' it.
I agree with you about Capital One and Ally. Both are offering the same rate right now. Thanks for your input here, being vigilant is a good plan. I use Mint to help notify me of any suspicious account activity.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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watchnerd
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Re: Keeping emergency funds in high yield checking

Post by watchnerd » Wed Mar 25, 2020 6:38 am

1st:

Where did you find a 2.5% checking account? Is that Capital One or elsewhere?

2nd:

Don't co-mingle checking and EF. It's too easy to overspend it. Just use the high yield checking as a way to earn more money and do monthly auto transfers to high yield savings elsewhere.
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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:45 am

Blue456 wrote:
Wed Mar 25, 2020 6:28 am
BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One? I’ve read on most finance blogs that it is a bad idea to keep emergency funds in checking accounts that you have easy access to, and I get it, but I’m not opposed to making some extra money off of my cash. I am pretty disciplined at not spending emergency funds on non-emergencies. I am more than happy to transfer $250 a month give or take into my Capital One account to keep the checking balance around $10k. Help please!
Up to you. Most people don't like keeping a lot of money in checking account because your account can be hacked by a compromised terminal. A dedicated savings account that's not swiped anywhere does not risk that. Now keep in mind that even if your account gets hacked, you can get your money back eventually back from a bank or credit union. How long it takes is anybody's guess. Having a separate emergency fund in savings account solves that issue.
Yes, I have thought about that. I only use my debit card for groceries at one store and monitor my accounts via Mint. I don’t use Mint other than for their alert system, which helped us find an unauthorized credit card charge before we left for work one day. Thanks for your advice. I’ll keep moving small amounts in excess of $10k over to the online account to lower the total amount in the account and solvency risk.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:53 am

watchnerd wrote:
Wed Mar 25, 2020 6:38 am
1st:

Where did you find a 2.5% checking account? Is that Capital One or elsewhere?

2nd:

Don't co-mingle checking and EF. It's too easy to overspend it. Just use the high yield checking as a way to earn more money and do monthly auto transfers to high yield savings elsewhere.
Thanks for posting. My local credit union has a great rate; I keep telling fellow BHs to look into their own! I found it online buried on a state forum. Worth a look considering all the normal high yield online accounts these days are sitting at 1.5% to 1.7% and CDs are not yielding much at all.

I think it’ll be fine given that the only times DH and I had to dip into savings at all was for less than $4000 total (have almost made up the difference). We are pretty open about our accounts. We have a couple different savings goals going on at the same time and I think getting a guaranteed 2.5% return on our short-term goals is worth it.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 6:59 am

JoeRetire wrote:
Wed Mar 25, 2020 6:26 am
Sounds like you already have decided what you want to do.

Just remain disciplined and remember what emergency funds are for.
Thanks JoeRetire. We’ve been financially disciplined and even more so now. Wanting to find a couple ways to bring in more income (donate plasma if medically possible and get a decent yield on cash are two of my ideas).
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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dwickenh
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Re: Keeping emergency funds in high yield checking

Post by dwickenh » Wed Mar 25, 2020 7:52 am

BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One? I’ve read on most finance blogs that it is a bad idea to keep emergency funds in checking accounts that you have easy access to, and I get it, but I’m not opposed to making some extra money off of my cash. I am pretty disciplined at not spending emergency funds on non-emergencies. I am more than happy to transfer $250 a month give or take into my Capital One account to keep the checking balance around $10k. Help please!
I have a rewards checking paying 2.07 up to 30,000. It is a great source for emergency funds. I also hold another 45000 in my MM account at Vanguard.
I think your plan is fine.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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JoeRetire
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Re: Keeping emergency funds in high yield checking

Post by JoeRetire » Wed Mar 25, 2020 8:35 am

BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:59 am
JoeRetire wrote:
Wed Mar 25, 2020 6:26 am
Sounds like you already have decided what you want to do.

Just remain disciplined and remember what emergency funds are for.
Thanks JoeRetire. We’ve been financially disciplined and even more so now. Wanting to find a couple ways to bring in more income (donate plasma if medically possible and get a decent yield on cash are two of my ideas).
It's hard to imagine that move will provide all that much more income.
But I wish you well anyway.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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Sandtrap
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Re: Keeping emergency funds in high yield checking

Post by Sandtrap » Wed Mar 25, 2020 8:41 am

You've had great input thus far. :happy

Add:

1 Compartmentalize your accounts.
2 Keep the EF in a seperate account that is for that purpose.
3 Then another account for working capital, daily use, etc.
4 Any amount is fine. 10k or 100k. Some have substantial sums in accounts like this.
5 You can "tier" your EF as well, some in the "high yield checking", some in a MM or Treasury Fund account at a brokerage, etc.
6 If you have brokerage accounts, be sure to setup ACH transfer links between everything (like a spider web) so you can access your funds conveniently and at no cost.
7 You have a good plan. Make it better by sticking to it and you'll do great.
8 Ignore the financial blogs. Lot's of "ex-spurts" there. :confused Do what works best for you.

j :happy
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nisiprius
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Re: Keeping emergency funds in high yield checking

Post by nisiprius » Wed Mar 25, 2020 8:49 am

Try it, and find out how your discipline holds out. a) I suspect won't. b) Speaking strictly personally, yeah, if money were earning 2.5% in my checking account I would be reluctant to move it to a 1.5% savings account "just" to protect me from myself. c) And I would be wrong.

I don't think it's likely that you'll succeed unless you literally write down the "segregated" amount on a little card you carry or something, and are mentally nimble enough to subtract that from your checking total, and to let your emotional anxiety be controlled by the remainder rather than the total.

I expect the current situation of a steeply inverted "yield curve" on checking and savings is not going to persist for very long, so the "problem" may solve itself.

I personally I do keep our "quick-access liquid money" segregated between a checking account, earning almost nothing, and a savings account earning almost nothing. So, for example, little windfalls go into the savings account so that the checking account is kept fairly clean as a basis for "mental accounting."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 9:25 am

dwickenh wrote:
Wed Mar 25, 2020 7:52 am
BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One? I’ve read on most finance blogs that it is a bad idea to keep emergency funds in checking accounts that you have easy access to, and I get it, but I’m not opposed to making some extra money off of my cash. I am pretty disciplined at not spending emergency funds on non-emergencies. I am more than happy to transfer $250 a month give or take into my Capital One account to keep the checking balance around $10k. Help please!
I have a rewards checking paying 2.07 up to 30,000. It is a great source for emergency funds. I also hold another 45000 in my MM account at Vanguard.
I think your plan is fine.
Wow that’s very good. If we ever have an emergency fund that grows to $30k I will look into rewards checking. Right now we have about 3 months or so but I’d like that number to be around 6 months or even 8. I think KlangFool says he has enough for 5 years of expenses.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

Dandy
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Re: Keeping emergency funds in high yield checking

Post by Dandy » Wed Mar 25, 2020 9:26 am

I see no real problem. The concern would be that you blend you normal use of a checking account to pay bills and you will be temped to eat into your emergency fund dollars -- because it would be too easy to do so. If that is a concern or becomes an issue then you could just leave the 10k in the high interest checking and use a no charge checking account for paying your bills and use the high yield checking account only for real emergencies.
OR
I'm one of the old timers that still uses a check register and reconciles my checking account monthly. :oops: I used to have a private mortgage that the lender (thanks Mrs. C) only wanted payments every 6 months. I had to make sure I had enough to write some large checks every 6 months. I divided the amount due by the number of paychecks in 6 months and each payday subtracted that from my checkbook register and added it to a Reserve page at the back of the register. When the last paycheck of the period came I would subtract the money from the Reserve and added back to my check register total and then pay the mortgage. The benefit of this approach is that I always knew how much was available for us to spend on bills and not eat into money I needed down the road. And I never missed a mortgage payment.

Good luck

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 9:34 am

nisiprius wrote:
Wed Mar 25, 2020 8:49 am
Try it, and find out how your discipline holds out. a) I suspect won't. b) Speaking strictly personally, yeah, if money were earning 2.5% in my checking account I would be reluctant to move it to a 1.5% savings account "just" to protect me from myself. c) And I would be wrong.

I don't think it's likely that you'll succeed unless you literally write down the "segregated" amount on a little card you carry or something, and are mentally nimble enough to subtract that from your checking total, and to let your emotional anxiety be controlled by the remainder rather than the total.

I expect the current situation of a steeply inverted "yield curve" on checking and savings is not going to persist for very long, so the "problem" may solve itself.

I personally I do keep our "quick-access liquid money" segregated between a checking account, earning almost nothing, and a savings account earning almost nothing. So, for example, little windfalls go into the savings account so that the checking account is kept fairly clean as a basis for "mental accounting."
Thanks Nisiprius, I fully hold myself accountable for this new experiment. I’ll see how things go for a month or two and if I give it all up I will message you on why I couldn’t manage it. I just know my past track record with saving in general and have found that every year I find a way to save more. This is just a new strategy to deploy. Hopefully this year I will be able to say the same. I do enjoy your posts by the way—your writing is beautiful and smart. I know you care about your fellow BHs.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

JackoC
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Re: Keeping emergency funds in high yield checking

Post by JackoC » Wed Mar 25, 2020 9:46 am

Blue456 wrote:
Wed Mar 25, 2020 6:28 am
BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One?
Up to you. Most people don't like keeping a lot of money in checking account because your account can be hacked by a compromised terminal. A dedicated savings account that's not swiped anywhere does not risk that. Now keep in mind that even if your account gets hacked, you can get your money back eventually back from a bank or credit union. How long it takes is anybody's guess. Having a separate emergency fund in savings account solves that issue.
That's what's most relevant for us. It's not the self discipline issue but the fact that so many far flung entities have the routing and acct number of our main checking account. And we give that info out whenever we write a check, not just when we deal electronically (and we virtually never use our debit cards for purchases, which many people do). OTOH only personally targeted hacking at our end would reveal even the existence of our savings accounts (and if you're the personal one-on-one target of a skilled human hacker you're in trouble no matter), though broader hacking aimed at the bank also might. All kinds of more half-baked identity crime can affect a frequently used checking account at one time or another.

Though like you say the risk isn't to permanent loss of the money, or that's highly unlikely at least.

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 9:53 am

Dandy wrote:
Wed Mar 25, 2020 9:26 am
I see no real problem. The concern would be that you blend you normal use of a checking account to pay bills and you will be temped to eat into your emergency fund dollars -- because it would be too easy to do so. If that is a concern or becomes an issue then you could just leave the 10k in the high interest checking and use a no charge checking account for paying your bills and use the high yield checking account only for real emergencies.
OR
I'm one of the old timers that still uses a check register and reconciles my checking account monthly. :oops: I used to have a private mortgage that the lender (thanks Mrs. C) only wanted payments every 6 months. I had to make sure I had enough to write some large checks every 6 months. I divided the amount due by the number of paychecks in 6 months and each payday subtracted that from my checkbook register and added it to a Reserve page at the back of the register. When the last paycheck of the period came I would subtract the money from the Reserve and added back to my check register total and then pay the mortgage. The benefit of this approach is that I always knew how much was available for us to spend on bills and not eat into money I needed down the road. And I never missed a mortgage payment.

Good luck
Sounds like you spent a lot of time with your checkbook! I wrote checks mostly when I was in college—my handwriting has gotten really terrible since then so I write in all caps on everything.

There are no fees on this checking account, but I do have to make sure to have 12 debit card transactions per month to earn the high APY. It works for me though because we just separate out our groceries when we make a trip once a week.

While it is nice to have things automated such as echecks for one-time transactions and for rent these days, I do miss the physicality of writing a check and “feeling” that the money was out of the account, like paying cash.

For my mental account of money we need for bill pay, I am allocating about $3,000 to cover all our bills (bare-bones + some luxuries + about $500 goes into savings each month). Ideally we would have between $9k and $18k total efund, or 3 to 6 months of living expenses.

I think the most cumbersome part of the plan is to take extra money out of the account, but I can automate it after I’ve given it a trial two months. Thanks for your help in mental accounting.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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8foot7
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Re: Keeping emergency funds in high yield checking

Post by 8foot7 » Wed Mar 25, 2020 9:57 am

With questions like these I think it's useful to keep absolute amounts in perspective. What kind of money are we really talking?

Ignoring compounding:
0.5% a year on 10,000 is $50 or $4/mo
1% a year on 10,000 is $100 or $8/mo
2% a year on 10,000 is $200 or $16/mo
1% a year on 30,000 is $300 or $25/mo
2% a year on 30,000 is $600 or $50/mo

These are not life-changing amounts of money so honestly it doesn't matter much what you do. I would say with the rate cut to zero a couple of weeks ago, yields will move away from 2% and down into the 1% and under range for most of these types of accounts. And frankly it is not worth $16/mo to me to have to remember to make 10 individual transactions with a debit card -- my time has a cost as well, both to track those requirements and also the physical act of going out to make purchases.

I think it was tfb who a while ago had this post that talked about how when yields are this low, your cash won't earn anything so stop trying to squeeze every last penny out of it.

So basically, do what makes sense to you but know you're still not talking about much additional money in the grand scheme of things.

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 10:00 am

JackoC wrote:
Wed Mar 25, 2020 9:46 am
Blue456 wrote:
Wed Mar 25, 2020 6:28 am
BrownEyedGirl_27 wrote:
Wed Mar 25, 2020 6:00 am
Hello everyone, so I have a high yield checking account that pays 2.5% APY on up to the first $10,000. I have a high yield savings with Capital One 360 that pays 1.5% APY on balances over $1. My question is, if I want to beef up my emergency fund over the next year, would it be prudent to use the excellent yield of my checking account to earn a decent chunk of money that I can then transfer over to Capital One?
Up to you. Most people don't like keeping a lot of money in checking account because your account can be hacked by a compromised terminal. A dedicated savings account that's not swiped anywhere does not risk that. Now keep in mind that even if your account gets hacked, you can get your money back eventually back from a bank or credit union. How long it takes is anybody's guess. Having a separate emergency fund in savings account solves that issue.
That's what's most relevant for us. It's not the self discipline issue but the fact that so many far flung entities have the routing and acct number of our main checking account. And we give that info out whenever we write a check, not just when we deal electronically (and we virtually never use our debit cards for purchases, which many people do). OTOH only personally targeted hacking at our end would reveal even the existence of our savings accounts (and if you're the personal one-on-one target of a skilled human hacker you're in trouble no matter), though broader hacking aimed at the bank also might. All kinds of more half-baked identity crime can affect a frequently used checking account at one time or another.

Though like you say the risk isn't to permanent loss of the money, or that's highly unlikely at least.
We only use echecks for rent and tithing. We use debit at a certain supermarket because they only accept debit or cash, and the two other places I have used it let me use Apple Pay, which is more secure. No foolproof way to be 100% safe with money but we do what we can to stay vigilant. Thank you.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

chevca
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Re: Keeping emergency funds in high yield checking

Post by chevca » Wed Mar 25, 2020 10:14 am

8foot7 beat me to it. But, quick math shows you'd get about $20/month keeping $10k in the checking account, or about $12/month leaving it in the savings account. If that "decent chunk" is enough for you to make it worth it, keep $10k in the checking account. Or, just leave the EF all in one spot. It really doesn't matter, is the point.

The higher rates some banks and CUs give on their checking/savings accounts sound GREAT... until you do the math and see they're really not paying you that much on the lower balances.

grog
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Re: Keeping emergency funds in high yield checking

Post by grog » Wed Mar 25, 2020 10:30 am

Personally I would leave $10K in checking and take the extra $100 per year. Then send the excess over to Capital One. My credit union pays more on the checking account than on savings so I keep a lot in checking. Never had a problem with it. But if you think you might overspend or are worried about security, then don't do it.

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Re: Keeping emergency funds in high yield checking

Post by sport » Wed Mar 25, 2020 10:36 am

Years ago, I had a CD at a bank that required a certain balance in other accounts to get a preferred rate. The account I used was my checking account. I used a paper register, and I just did not include the extra money in my register. Of course, I knew it was there. However, since we did not see it, there was no temptation to spend it.

Dandy
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Re: Keeping emergency funds in high yield checking

Post by Dandy » Wed Mar 25, 2020 10:43 am

Sounds like you spent a lot of time with your checkbook!
:D Probably a little bit - but an extra entry each paycheck wasn't that bad. You have to remember this was prior to the internet and many other improvements. But, even today I know how much money I really have uncommitted in my checking account and if you don't keep an accurate register and reconcile - maybe you don't.

My adult children have not copied their father's checkbook focus so it isn't genetic!!

The key is what works for you. Good luck with the plan you decided on.

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BrownEyedGirl_27
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Re: Keeping emergency funds in high yield checking

Post by BrownEyedGirl_27 » Wed Mar 25, 2020 10:58 am

8foot7 wrote:
Wed Mar 25, 2020 9:57 am
With questions like these I think it's useful to keep absolute amounts in perspective. What kind of money are we really talking?

Ignoring compounding:
0.5% a year on 10,000 is $50 or $4/mo
1% a year on 10,000 is $100 or $8/mo
2% a year on 10,000 is $200 or $16/mo
1% a year on 30,000 is $300 or $25/mo
2% a year on 30,000 is $600 or $50/mo

These are not life-changing amounts of money so honestly it doesn't matter much what you do. I would say with the rate cut to zero a couple of weeks ago, yields will move away from 2% and down into the 1% and under range for most of these types of accounts. And frankly it is not worth $16/mo to me to have to remember to make 10 individual transactions with a debit card -- my time has a cost as well, both to track those requirements and also the physical act of going out to make purchases.

I think it was tfb who a while ago had this post that talked about how when yields are this low, your cash won't earn anything so stop trying to squeeze every last penny out of it.

So basically, do what makes sense to you but know you're still not talking about much additional money in the grand scheme of things.
Yeah, I actually did the math wrong when I was calculating compound interest over 12 months. :oops: Thank you for alerting me to my error. I'll just keep checking and online separate from here on out. Guess it's back to bank account churning for me *sigh*.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

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