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where should i put my emergency fund money?
Old 11-12-2010, 10:28 PM   #1
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where should i put my emergency fund money?

once again i got my **** with ameriprise and i need to get out. right now we got an emergency fund with them in a cash reserve account with a .05% interest rate with a Current Annualized Yield of .04%. Where should i put it to get the most out of it? right now we only have 4,000$. should i put some at my local bank and some in online accounts that i have read about? i would like to have good access to it because i don't want to wait 7 days to get money. thanks
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Old 11-13-2010, 12:09 AM   #2
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dooo42: I'd make it easy on myself. For example, my local credit union pays around 1% or so on deposits in their 'instant reserve' account. I'd put the money in a local institution where I could go get it, in cash, if needed. Any difference in interest rates on $4,000 in negligible. For example, if you could magically get 2% somewhere, the difference is $40/year.

Steve
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Old 11-13-2010, 12:14 AM   #3
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I keep my emergency fund money in online banks. I can access the money with an ATM (no fee ATMs all over the country) or transfer it to my local bank account. Right now, ING pays 1.1% in the savings account.
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Old 11-13-2010, 12:34 AM   #4
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I keep my emergency fund money in online banks. I can access the money with an ATM (no fee ATMs all over the country) or transfer it to my local bank account. Right now, ING pays 1.1% in the savings account.

I also use ING orange. very user friendly.
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Old 11-13-2010, 11:19 AM   #5
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I've posted on this before, but I see no reason to keep 'emergency money' in a low interest, 'dollar certain' account. The key is liquidity and access. If you set up for electronic transfers with your broker or fund manager, transfers are fast and easy. Many funds allow check writing for checks >$500 or whatever. Sign up.

I do keep a couple months expenses in my checking/savings account, just for simplicity, and if I had some 'oopps' moment, the money is right there.

Sure maybe the fund will be down a smidgen when you need to draw on it. That's life, but if you are investing at all that means you count on the long term appreciation of assets. So why treat this money differently? Your emergency is unlikely to be exactly $4,000.01, there just is no 'magic' to a dollar-certain figure. With the added growth, that fund will be bigger and able to handle bigger emergencies. Keep it growing.

OK, this assumes you have investments to begin with. If that $4,000 is a large part of your liquid net worth, I cans see not wanting to 'risk' any of it. But beyond that, I think of it as one big pile of money, investment/safety-wise. I don't know if your "only have" comment referred to this account, or total portfolio.


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Old 11-13-2010, 11:47 AM   #6
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I've posted on this before, but I see no reason to keep 'emergency money' in a low interest, 'dollar certain' account. The key is liquidity and access. If you set up for electronic transfers with your broker or fund manager, transfers are fast and easy. Many funds allow check writing for checks >$500 or whatever. Sign up.

I do keep a couple months expenses in my checking/savings account, just for simplicity, and if I had some 'oopps' moment, the money is right there.

Sure maybe the fund will be down a smidgen when you need to draw on it. That's life, but if you are investing at all that means you count on the long term appreciation of assets. So why treat this money differently? Your emergency is unlikely to be exactly $4,000.01, there just is no 'magic' to a dollar-certain figure. With the added growth, that fund will be bigger and able to handle bigger emergencies. Keep it growing.

OK, this assumes you have investments to begin with. If that $4,000 is a large part of your liquid net worth, I cans see not wanting to 'risk' any of it. But beyond that, I think of it as one big pile of money, investment/safety-wise. I don't know if your "only have" comment referred to this account, or total portfolio.
+1 I very definitely agree with this strategy.

We also keep a few months of liquid cash in the check book to cover minor surprises, senior moments, unplanned events and the like.

But, emergencies are another matter. For those, I keep some high limits on credit cards, a credit line with my brokerage house and some liquid portfolio withdrawal opportunities. I'm 63 yo and to date have never actually needed to quickly grab $10k - $20k - $30k for an "emergency." If I did, I know how I'd do it. And there would be some costs involved. But I'm guessing these costs would be less than the opportunity cost of keeping several $10k separate in cash equivalents over many years.

BTW, I also consider emergency funds as being very different than money I'm keeping liquid for investment flexibility in my FIRE portfolio.

To OP: Since you're only talking $4k, as another poster mentioned, it doesn't matter too much. Just leaving it in a zero interest checking account will only cost you $40/yr vs. some other likely opportunity.
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