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Where to keep my emergency fund?
Old 01-04-2009, 01:41 AM   #1
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Where to keep my emergency fund?

I have about 25% in ING savings, 20% in ING CD's(I guess this cannot really be emergency money since they won't mature for several months), 20% in BofA savings and 35% in Vanguard MM but is there a better place (higher yield) to keep my emergency money? MM and ING used to be good but now it's only like 2.6% interest that I am getting, so I thought I'd ask...

Thank you,

tmm
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Old 01-04-2009, 02:10 AM   #2
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Have you looked at Capital One? Offer online savings, mm, and cd's with pretty good rates and very easy to work with based on our experience.
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Old 01-04-2009, 05:37 AM   #3
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Somewhat tongue in cheek: given what happened in 2008, perhaps cash in the mattress and gold coins buried in the backyard ? Pays lousy interest (just like most things right now [pout] )
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Old 01-04-2009, 05:37 AM   #4
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My emergency fund is in ETrade Bank. Last time I noticed, it was paying 3.03%.

I don't see anything wrong with part of an emergency fund being in a short term CD. The accessibility should be considered based on how you would use the emergency fund. Immediate emergencies like major repairs and short term living expenses should be "on demand." My fund is expected to cover about a year of frugal living expenses so having some in a 6 mo CD wouldn't be a problem.
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Old 01-04-2009, 06:30 AM   #5
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Well, when I went into my Retirement plan mode a few yrs ago? I follow Scott Burns of Asset builder and put it in VSGBX fund.. It is a short Term Treas. fund with Check Writting, thus I think better than a Traditional MMkt. and has done alot better than MMkt and CD's for me..

I keep a 3 yrs COH for Bills with 2 yrs in VSGBX and the 3rd Yr In A Intermediate Treas. Fund like VFITX or If a Fido Fan, Ck out FIBIX.

Plan B> If and whenever LT Treasuries go back to a +7% rate as they were in the early 2000 yrs? And CD's too BTW.. I plan to Take a Couple of those 3 yrs COH and Just buy them instead and just let the $ sit in there..However, I don't expect Those kinds of Treas. Rates for quite awhile and we'll probably Have Either Very Low Rates or Even Deflation rates for awhile.. But, With "Preservation of Capital" as #1 Prioity with this $, that is 2ndary..

And I also keep a Few Months Of my Bills IN Old fashion CASH & Gold Coins..... if went thru the Bank Crash of the 80's, you know why.. ( My $ was tied up for 3 wks ) and can happen again With eithe Banks or MMkts , even with FDIC.. if their is another Big Run on them...

another Item? Keep a Seperate Visa Credit Card handy with $10k LOC , regardless of the Int. Rate.. I have 2 reg. one's with very low rates and $25k LOC's for Daily use as well..and a American Express isn't a bad idea to have either..

Last but not least? Keep a LOC on your Home or Rental Properties.. and use it once a yr to keep it active.. Mine are good for 10 yrs before renewal..

For when it comes to Needing COH/Creidt ASAP? I could care less about what the rates are.. I end up paying them back off in a Few Months anyway after the problem has passed and it's Chump change vs the ulternative..

Hope this gives you some ideas for your own situaiton..
Happy New Yr! Finally leaving This North Tundra of Wi. and Going down to My Fla Place! can't be a Moment too soon..! Getting Cabin Fever! LOL
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Old 01-04-2009, 06:39 AM   #6
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Keep a LOC with a remaining draw of $16K. Have never had to tap an 'emergency' fund yet. Budget has been pretty accurate over time.
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Old 01-04-2009, 07:35 AM   #7
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I keep about half liquid in my interest checking account (1.X% currently) and the rest is locked up in CDs at Pen Fed. If the commode hits the windmill badly enough, I can break the CDs for the cost of 6 months' interest and in the meantime I earn a better rate. I would suggest that you try to set up secondary sources of liquidity as well: HELOC, signature line of credit, credit cards from several banks, margin loan availability on a taxable account, etc.
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Old 01-04-2009, 08:32 AM   #8
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I keep about half liquid in my interest checking account (1.X% currently) and the rest is locked up in CDs at Pen Fed. If the commode hits the windmill badly enough, I can break the CDs for the cost of 6 months' interest and in the meantime I earn a better rate. I would suggest that you try to set up secondary sources of liquidity as well: HELOC, signature line of credit, credit cards from several banks, margin loan availability on a taxable account, etc.
After breaking the CDs, I'd be selling assets and not running up debt. Of course, my CD stash is enough for my basic retirement expenses so it isn't an issue unless you're trying to sell me a trip to Europe.
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Old 01-04-2009, 08:38 AM   #9
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After breaking the CDs, I'd be selling assets and not running up debt. Of course, my CD stash is enough for my basic retirement expenses so it isn't an issue unless you're trying to sell me a trip to Europe.
I think it would depend on several factors for me, including job security. If for some reason I needed more than I had in my emergency fund, I might be inclined to use debt IF I had extreme job security rather than trying to sell assets at low prices while they aren't very liquid. I would probably be inclined to sell those assets later to pay off the debt, but I'm not sure I'd sell the depressed assets at depressed prices.

Of course, that assumes rock-solid job security. If I didn't have that, there's no way I'm going into debt...
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Old 01-04-2009, 08:42 AM   #10
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Of course, that assumes rock-solid job security. If I didn't have that, there's no way I'm going into debt...
I've lost three jobs over my career and in each case I had "rock-solid job security." I have it now but I don't think that Monday can't be my last day.
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Old 01-04-2009, 09:31 AM   #11
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After breaking the CDs, I'd be selling assets and not running up debt. Of course, my CD stash is enough for my basic retirement expenses so it isn't an issue unless you're trying to sell me a trip to Europe.
The borrowing is for liquidity purposes only. When I found out I was going to be unemployed, I drew down $50k on my HELOC and stahed it in a money market. Never ended up touching the money because I had plenty of cash savings and was only out of a paycheck for 3 months, but it was yet another buffer for me in a very uncertain time. When I found a job it was no big deal to write a check and pay it all back, and I paid bupkis a month in excess interest for the privilege of hanging onto the excess cash.
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Old 01-04-2009, 09:42 AM   #12
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Two points about the PENFED CD's, then I will be quiet. Yes you can break them early but you can also borrow against them at 2% above the paid interest rate AND/OR you can withdraw the interest earnings MONTHLY (without penalty of any kind).
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Old 01-04-2009, 09:44 AM   #13
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More to think about than just what these accounts pay!

If you are like most responsible folks, you have a will, and a durable POA in case you are unable to make decisions on your own. These won't help you if your funds are at an institution (like ING) that doesn't accept a POA. Because most of us chase yield, we can end up with funds at these insensitive banks. So, be sure you have on-line access, with the log-on id and pword in someplace where your DW/DH can access them. This will allow whoever is caring for you to move your funds into an institution which will honor your POA (and get out your money).
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Old 01-05-2009, 12:48 PM   #14
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I would like to thank everyone for their thoughtful/thought-provoking posts. I am leaning toward looking into Vanguard fund that has the check writing abilities.

tmm
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Old 01-05-2009, 12:58 PM   #15
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If you are in a higher tax bracket, you could look at VWSTX (Vanguard short term tax exempt fund). It's pretty stable, pays a bit more than traditional MMFs (after tax), and you can write checks directly against that fund as well. At any rate, that's where I have my emergency fund right now.
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Old 01-05-2009, 01:32 PM   #16
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FIREdreamer,
I do have VWSTX already. I wasn't aware you could write checks against this fund. The rate is defintely better than a regular MM. Do you write checks against this fund?


tmm
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Old 01-05-2009, 02:17 PM   #17
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FIREdreamer,
I do have VWSTX already. I wasn't aware you could write checks against this fund. The rate is defintely better than a regular MM. Do you write checks against this fund?


tmm
You can write checks against most bond funds at Vanguard. I do have check writing privileges against this fund, but never had to actually use it.
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Old 01-05-2009, 02:20 PM   #18
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FIREDdreamer,

Thank you for the info. I was not aware of that (can write checks against most bond funds at Vanguard.) I will set up something against my VWSTX and move more money in there from my BofA savings. I don't need to write checks, but it's good to have that option just in case I need to write a big check!

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