Where should I put these emergency funds?

[Tiger]

My emergency money is split between a money marekt fund and a CD. The CD coming due this week and I was going to keep that money in my money market fund. Are there other alternatives that I should consider?

 

[Achiever51]

Right now the MMF is probably as good a place as any given the low CD rates.

 

[Marquette]

I have a similar question. We have about half of our emergency fund in a money market and the remainder in a CD ladder. We've been thinking of rolling the CD portion into I bonds as they mature. I've read some previous posts on I bonds but I'm not quite sure what the current sentiment is.

 

[jblack]

For ease of maintenance I just have my emergency fund sitting in a decent savings account (4.05% EmigrantDirect) that is very accessible and has no associated fees.

If it were a larger sum I'd probably spend more time with it, but my only requirements are that it not lose purchasing power and be easy to get at. So far the rates have stayed relatively competitive.

 

[clifp]

I think emergency funds should be in a money market, or perhaps very short 3 month or less CDs. The problem with IBonds if you pay a penalty if you redeem them in less than five years, similar to CDs. If the flood, accident, kid gets arrested and needs bail money, you want to be access your funds immediately.

 

[FinanceDude]

Stick with the money market fund.........

 

[Marquette]

Well, the reason, in our case, that I was considering the i bonds is because the cash in the MM is "we just crashed our only car into the basement and broke a water main" type of on hand cash whereas the CD ladder is the "I just lost my job, I need a stream of income monthly over the next x months". In that case, should I still knock it off and just keep it all in a MM or would ibonds be acceptable? (gambling with the fact that I'm in a pickle if I lose my job before a year is up on the ibond).

 

[LOL!]

We had our emergency money parked in a tax exempt money market fund making 2.7% (our marginal rate is 34%), so I'm thinking I can do better than this.

So I exchanged a stock fund in an IRA and bought VFIIX the Vanguard GNMA fund yielding about 5%. Since it's in a retirment account, the dividends are tax-free (well, really deferred). In the taxable account, I exchanged the tax-exempt money market fund for the Vanguard total stock market fund.

So I now have my emergency fund earning a tax-free 5%. As a bonus, if stocks go down, I would not have been able to deduct the loss on taxes if that stock fund was still in my IRA. But now that it is in a taxable account, I could sell for a loss and deduct that against other capital gains.

Bottom line: Your emergency fund could be in your IRA and save you some bucks.

 

[jIMOh]

I keep my Emergency fund in a 90 day CD ladder. 3 CDs, each with 1 month expenses in it. Just keep rolling it over.

I have heard (read) in similar forum to this one that the long term yield of a CD ladder is higher than a money market. I think the CD ladder needs to be 3-4 years out though to lock in higher rates for longer periods. If CD rate is less than 3%, I would keep CDs short term or go with money market. If you can lock in 4% over a 2 or 3 year period, I think the CD guarantee is much better than the fluctuating return of a money market.

 

[Tiger]

Thanks for all of the replies, I guess I will saty with the money market fund.