topic Best Place for an Emergency Fund? in Personal Finance

Best Place for an Emergency Fund?

bankjamie — Thu, 16 Dec 2021 04:01:36 GMT

With the changes to HMBradley's savings accounts, I was curious what else is out there.

Yotta - ~1.5% APY
Quontic -1.01% up to 150k (Mint) (10 debit card spends)
Axos - 1% up to 50k (Mint) (Direct Deposit, 10 debit card spends, other hoops)
OnJuno - 1.2% up to 50k (No Mint)
OneFinance - 1% up to 25k (Direct Deposit)
T-Mobile Money - 1% (No Mint)

Re: Best Place for an Emergency Fund?

AMJ50 — Thu, 16 Dec 2021 05:28:54 GMT

DCU 6.17% on the first $1000 saved

Re: Best Place for an Emergency Fund?

tortoise_credit — Thu, 16 Dec 2021 15:48:37 GMT

Alternatively, you could look at Series I Bonds from the Treasury - the current rate is 7.12%.

Few downsides: money is locked up for 1 year, it has a 3 month interest penalty if redeemed before 5 years, and the TreasuryDirect website isn't the greatest.

Edit: also there's a $10k limit per person (so $20k if you have a spouse), but you can also get $5k in paper I bonds from a tax refund. That's usually enough to get a good portion, or all of, your emergency fund. Some people do just a half, third, or quarter of their EFund at a time due to the 1 year lockup.

Re: Best Place for an Emergency Fund?

iced — Thu, 16 Dec 2021 22:23:59 GMT

@AMJ50 wrote:
DCU 6.17% on the first $1000 saved

While it's nice for that $1000, $1000 is also not nearly enough for an emergency fund, and the interest rate above $1000 is garbage. Their dividend checking account has a higher interest rate than their savings saves.

For the OP, if you're fine maintaining whatever requirements there are for interest rates for HYSAs, the list you have is probably fine, but I'm of the camp that emergency savings are really needing to be somewhere easily accessible with no catches, delays, penalties, or the like...even if that means interest is lower. Even with the HYSA, you're not really keeping up with inflation and the money isn't going to grow. But, it's not meant to either.

I'd recommend to avoid the 0.01% institutions for it, but otherwise find a bank you like with a 0.5% or so rate and park it there. You can take additional non-emergency funds and place those in places like DCU for the extra couple bucks a month if you like.

Re: Best Place for an Emergency Fund?

Anonymous — Sun, 19 Dec 2021 19:45:31 GMT

Having an emergency fund that's locked up for 1-3 years really defeats the purpose IMO because you might need that Money for an emergency during tha time, especially if you're also facing penelties to access said funds. What good does earning high rate of retrun if it only winds up going to said fees? While a typical HSA doesn't earn as much I feel it's the best place for such a fund for the intended purpose, and is certainly better rate of return than reg savings accounts. And it's obviously earning more than that cash under the mattress that i subscribe too but at least it's accessible in an emergency. lol

Re: Best Place for an Emergency Fund?

MySunrise271 — Tue, 21 Dec 2021 20:58:24 GMT

Consumers Credit Union..4.01APY upto 10k...but some hoops you need to jump through🙂

Re: Best Place for an Emergency Fund?

Anonymalous — Thu, 23 Dec 2021 03:38:24 GMT

@tortoise_credit beat me to the punch, but here's some more detail on a slightly different option:

Series I Savings Bonds

https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm

7.12% return, so higher than any saving or checking account. $10,000/person/year limit. Can't cash them in before 1 year, so there's a lag time before they become available. If you cash them in before 5 years, you pay a 3 month penalty.

The ideal plan would be to ladder in over a few years, by buying a few thousand worth, waiting a year, then buying some more. That way only a small portion are unavailable, at any moment in time. The 3 month penalty should be acceptable, since it's an emergency fund; you're not supposed to touch it. And they're designed to track inflation, so you shouldn't ever lose real value. The per person cap means they won't be enough for a full emergency fund, so you'll have to supplement them with other savings. It's slightly less liquid than a savings account, but in many cases that's a virtue. It makes it less likely you'll deplete your fund on things that can be planned for, like repairing a car every once in a while or replacing an old furnance, thus preserving those funds for real emergencies.

Re: Best Place for an Emergency Fund?

Guyatthebeach — Wed, 22 Dec 2021 03:42:57 GMT

Bankjamie,

Take a look at Redstone FCU. They have a savings account with a 2.1%APR for the first $2500. Also if you will to leave money locked up in a CD, Navy Federal has a CD for 2.96%APR for the first $3000, and it's a year term that is renewable. The only stipulation is that you have direct deposit. I opened to store emergency funds. Luckily I've never had to use the yet.

Guyatthebeach

Re: Best Place for an Emergency Fund?

Revelate — Thu, 23 Dec 2021 16:51:15 GMT

Just throwing it out there but a lot of places you may be on a 3 day access period anyway (ACH times) if chasing a HYSA.

If you're doing that you can just put it in a brokerage account at a major institution as you can get a transaction settled in 3 days anyway generally. I pool excess cash which doubles as my emergency fund and a truly opportunistic cash reserve in a .01% or whatever account at Chase because I can get it anywhere in the world at wire speed.

Admittedly I'm not a low net worth individual anymore so I don't *need* this money to be making a large return, but do take into account how quickly you actually need the money because if it's a while, well, you have a lot of opportunities... but your definition of emergency may be different than mine.

Re: Best Place for an Emergency Fund?

tortoise_credit — Thu, 23 Dec 2021 19:33:33 GMT

@Anonymalous I'm glad there's another I Bond advocate here. In my opinion, if the Federal Gov't has to limit the amount of money you can loan them, it's probably a good deal.

Re: Best Place for an Emergency Fund?

Credit_Sleuth — Tue, 11 Jan 2022 13:19:08 GMT

I have been using Donut for the past year, it has various savings plans, the highest return is 6% - 10%. This is achieved through Defi lending. There is exposure to Crypto but you can transfer in and out in USD through ACH, and it is quick with my bank (Charles Schwab). I know some people might be wary of it being based on Defi, so it doesn't have insurance. However, they back the investments by over-collateralizing them and having smart contract audit protections in place. The app also uses banking-grade encryption 256-bit. Just thought I would put this out there for those who may be interested.

I'm earning up to 10% APY on my savings with Donut.

handyRe: Best Place for an Emergency Fund?

tnhomestead — Tue, 04 Jan 2022 18:23:39 GMT

From my point of view, in my safe. It's an emergency fund so I want it handy, 24/7. Getting a 1 or 2 % interest rate with 6% inflation is not worth it to me in case of a major emergency. If power goes out as itdid here for a few days, I don't care. If I need a tow, here's the cash, I will send it in for reimbursement

Re: handyRe: Best Place for an Emergency Fund?

Anonymalous — Tue, 04 Jan 2022 21:50:53 GMT

@tnhomestead wrote:
From my point of view, in my safe. It's an emergency fund so I want it handy, 24/7. Getting a 1 or 2 % interest rate with 6% inflation is not worth it to me in case of a major emergency. If power goes out as itdid here for a few days, I don't care. If I need a tow, here's the cash, I will send it in for reimbursement

I think most people in the thread are using the term emergency fund to refer to the 3-6 months of income that's recommended to help smooth over longer term (but still short term) emergencies or major life transitions, like losing a job or an accident. Not relatively minor and immediate expenses like tows in the night.

But you're raising a valid point. It's probably better to think of emergency funds, plural, than a single monolithic emergency fund. They'd differ in size and accessibility. The first tier is something like your cash in a safe, to cover very short term problems when other systems are down or unavailable (middle of the night, for instance). The next and much larger tier would be funds that might not be accessible immediately, but which can be accessed in a few days. There might be some withdrawal penalties, but they shouldn't be too steep. That would include things like a money market account or year old I Bonds. It's also useful to look up hours, transfer limits and times (ACH, wire, maybe even Zelle; incoming/outgoing may be different; and they typically have per day and monthly limits), cashier's check costs, and so forth. It's also useful to diversify your emergency funds a bit -- if one bank is down or they freeze your accounts or whatever, that could lock up your emergency fund exactly when you need it.

Re: handyRe: Best Place for an Emergency Fund?

Kree — Tue, 04 Jan 2022 21:23:00 GMT

@Anonymalous wrote:
@tnhomestead wrote:
From my point of view, in my safe. It's an emergency fund so I want it handy, 24/7. Getting a 1 or 2 % interest rate with 6% inflation is not worth it to me in case of a major emergency. If power goes out as itdid here for a few days, I don't care. If I need a tow, here's the cash, I will send it in for reimbursement
I think most people in the thread are using the term emergency fund to refer to the 3-6 months of income that's recommended to help smooth over longer term (but still short term) emergencies or major life transitions, like losing a job or an accident. Not relatively minor and immediate expenses like tows in the night.

Thanks. I couldn't figure out why people needed such large funds. This clarified things for me.

Re: handyRe: Best Place for an Emergency Fund?

iced — Tue, 04 Jan 2022 21:51:35 GMT

@Anonymalous wrote:
@tnhomestead wrote:
From my point of view, in my safe. It's an emergency fund so I want it handy, 24/7. Getting a 1 or 2 % interest rate with 6% inflation is not worth it to me in case of a major emergency. If power goes out as itdid here for a few days, I don't care. If I need a tow, here's the cash, I will send it in for reimbursement
I think most people in the thread are using the term emergency fund to refer to the 3-6 months of income that's recommended to help smooth over longer term (but still short term) emergencies or major life transitions, like losing a job or an accident. Not relatively minor and immediate expenses like tows in the night.

But you're raising a valid point. It's probably better to think emergency funds, plural, than a single monolithic emergency fund. They'd differ in size accessibility. The first tier is something like your cash in a safe, to cover very short term problems when other systems are down or unavailable (middle of the night, for instance). The next and much larger tier would be funds that might not be accessible immediately, but which can be accessed in a few days. There might be some withdrawal penalties, but they shouldn't be too steep. That would include things like a money market account or year old I Bonds. It's also useful to look up hours, transfer limits and times (ACH, wire, maybe even Zelle; incoming/outgoing may be different; and they typically have per day and monthly limits), cashier's check costs, and so forth. It's also useful to diversify your emergency funds a bit -- if one bank is down or they freeze your accounts or whatever, that could lock up your emergency fund exactly when you need it.

I would agree something like a tow truck isn't emergency funds, but rather petty cash. That said, I'm not even sure it should be cash as more and more things are going cashless -- and the pandemic only accelerated it. I'm already at the point that about the only people I deal with who prefer cash either don't understand or dislike technology, or looking to hide the transaction under the table (e.g., tips they would rather not report to the IRS). When the electronic systems go down, merchants aren't falling back on cash transactions typically. Too much risk, too little reward.

I don't know if I see a short-term and medium-term need for separate emergency funds though. Anything that needs immediate payment is what credit cards are for, that's 20+ days to move money from any emergency fund to cover it, so whether it's accessible in 1 day or 4 doesn't seem very relevant. If someone wants to keep them separate it's fine, but I don't really see a value-add in having something accessible in 8 hours versus 72.

Re: handyRe: Best Place for an Emergency Fund?

Anonymalous — Tue, 04 Jan 2022 22:22:19 GMT

@iced wrote:
I would agree something like a tow truck isn't emergency funds, but rather petty cash. That said, I'm not even sure it should be cash as more and more things are going cashless -- and the pandemic only accelerated it. I'm already at the point that about the only people I deal with who prefer cash either don't understand or dislike technology, or looking to hide the transaction under the table (e.g., tips they would rather not report to the IRS). When the electronic systems go down, merchants aren't falling back on cash transactions typically. Too much risk, too little reward.

I don't know if I see a short-term and medium-term need for separate emergency funds though. Anything that needs immediate payment is what credit cards are for, that's 20+ days to move money from any emergency fund to cover it, so whether it's accessible in 1 day or 4 doesn't seem very relevant. If someone wants to keep them separate it's fine, but I don't really see a value-add in having something accessible in 8 hours versus 72.

I think you might want to reconsider that a bit. If you're house catches fire, you can probably get a hotel room and fill your car with gas using a credit credit, and then you can withdraw some money with a debit card at an ATM. But that's because the fire only affected your house, and maybe a couple neighbors. It's not true for widespread emergencies, which impact infrastructure and supply chains. And the bigger the emergency, the more systems that are impacted, the broader the area suffering the outages becomes, and longer it takes for those resources to start working again.

To give an example, after Katrina, many people who stayed tried to leave the coast after the storm passed. But power was out. There were gas stations, but they didn't have operational ATM machines or card readers. So if you didn't have cash, you couldn't fill up your car, and get away from the affected area. The same applied to hotels and hotels rooms. Cell phone service was spotty and overwhelmed (email was typically the best way to communicate -- always try alternative methods of contacting family/etc.), rental cars and trucks were all taken, flights were all booked, and so on.

There's some value in being self-sufficient for a couple days. We're in a pretty safe world, and we're used to only short term outages. But emergency planning is for rare emergencies, not everyday events.

Re: handyRe: Best Place for an Emergency Fund?

iced — Tue, 04 Jan 2022 22:35:05 GMT

@Anonymalous wrote:
I think you might want to reconsider that a bit. If you're house catches fire, you can probably get a hotel room and fill your car with gas using a credit credit, and then you can withdraw some money with a debit card at an ATM. But that's because the fire only affected your house, and maybe a couple neighbors. It's not true for widespread emergencies, which impact infrastructure and supply chains. And the bigger the emergency, the more systems that are impacted, the broader the area suffering the outages becomes, and longer it takes for those resources to start working again.

To give an example, after Katrina, many people who stayed tried to leave the coast after the storm passed. But power was out. There were gas stations, but they didn't have operational ATM machines or card readers. So if you didn't have cash, you couldn't fill up your car, and get away from the affected area. The same applied to hotels and hotels rooms. Cell phone service was spotty and overwhelmed (email was typically the best way to communicate -- always try alternative methods of contacting family/etc.), rental cars and trucks were all taken, flights were all booked, and so on.

There's some value in being self-sufficient for a couple days. We're in a pretty safe world, and we're used to only short term outages. But emergency planning is for rare emergencies, not everyday events.

What I'm implying is that when such a situation of widespread outage does happen, many businesses aren't going back to taking cash instead. They shut down. They have many, many problems and not being able to take credit cards becomes the least of them.

Most of the country is quickly passing the point of no return to going back to the old ways of doing transactions. Some of the more rural areas may function as they didn't jump as far ahead as major cities, but if something like the above hit NYC, you're not suddenly going to see cashless places start taking cash.

When I was in the Napa/Sonoma area during a long power outage (late 2019), most places shut down. The ones that didn't fired up generators and brought their card systems online. I was still paying with cards. One or two small mom-pop shops took cash, but many others didn't want to deal with the issues associated with their employees handling cash, and I was completely able to function cashless despite widespread and prolonged outages.

Re: handyRe: Best Place for an Emergency Fund?

Anonymalous — Wed, 05 Jan 2022 00:13:27 GMT

@iced wrote:
What I'm implying is that when such a situation of widespread outage does happen, many businesses aren't going back to taking cash instead. They shut down. They have many, many problems and not being able to take credit cards becomes the least of them.

Most of the country is quickly passing the point of no return to going back to the old ways of doing transactions. Some of the more rural areas may function as they didn't jump as far ahead as major cities, but if something like the above hit NYC, you're not suddenly going to see cashless places start taking cash.

When I was in the Napa/Sonoma area during a long power outage (late 2019), most places shut down. The ones that didn't fired up generators and brought their card systems online. I was still paying with cards. One or two small mom-pop shops took cash, but many others didn't want to deal with the issues associated with their employees handling cash, and I was completely able to function cashless despite widespread and prolonged outages.

A power outage, even one that lasts a couple days, isn't much of an emergency. I think you're correct that there's more and more of a push toward a cashless society, but cash is still the default when a real disaster takes down significant portions of the infrastructure.

Re: handyRe: Best Place for an Emergency Fund?

iced — Wed, 05 Jan 2022 00:27:18 GMT

@Anonymalous wrote:
@iced wrote:
What I'm implying is that when such a situation of widespread outage does happen, many businesses aren't going back to taking cash instead. They shut down. They have many, many problems and not being able to take credit cards becomes the least of them.

Most of the country is quickly passing the point of no return to going back to the old ways of doing transactions. Some of the more rural areas may function as they didn't jump as far ahead as major cities, but if something like the above hit NYC, you're not suddenly going to see cashless places start taking cash.

When I was in the Napa/Sonoma area during a long power outage (late 2019), most places shut down. The ones that didn't fired up generators and brought their card systems online. I was still paying with cards. One or two small mom-pop shops took cash, but many others didn't want to deal with the issues associated with their employees handling cash, and I was completely able to function cashless despite widespread and prolonged outages.
A power outage, even one that lasts a couple days, isn't much of an emergency. I think you're correct that there's more and more of a push toward a cashless society, but cash is still the default when a real disaster takes down significant portions of the infrastructure.

Power outage, hurricane, meteor strike, etc - none of it is going to make modern society go backwards to taking cash (or gold as I've heard more than one doomsdayer hope for) in a few years time. Even today, some merchants lack the infrastructure to even take cash (register-less) or deem it too great a risk (no secure way to store large sums, employees can't be trusted to not skim, etc).

Re: handyRe: Best Place for an Emergency Fund?

Anonymalous — Wed, 05 Jan 2022 02:02:28 GMT

@iced wrote:
Power outage, hurricane, meteor strike, etc - none of it is going to make modern society go backwards to taking cash (or gold as I've heard more than one doomsdayer hope for) in a few years time. Even today, some merchants lack the infrastructure to even take cash (register-less) or deem it too great a risk (no secure way to store large sums, employees can't be trusted to not skim, etc).

None of that has any real relevance to what I've been discussing, which is the real disasters that occur on a regular basis, and the practicalities of emergency management and response.

Cash is a good fallback for a few days after a major disaster that affects a widespread area and knocks out much of the infrastructure.