What to do with emergency fund?

Submitted by jammun14 t3_zzvgzo in personalfinance

I finally completed my personal 6 month emergency fund this week. What can I do with it to keep it out of sight and potentially increase while still being easily available if I need it? I haven't seen many HYSAs lately. Obviously bonds or CDs would hold it a little too tight. Just keep it in a separate savings account?

ETA: By "many" i mean they're not very high (was only seeing 2% max) or they're banks I've never heard of. I know HYSA is a good option, but until now never saw recommendations for banks I'd heard of or had a good yield. I appreciate the recommendations!

ETA2: I love that y'all are up and more responsive than my plant post. But y'all need some coffee or something, some of you come off kinda cranky. šŸ˜‚ I appreciate the help though, I suppose that's worth the 'tude lol

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KCPilot17 t1_j2drk1j wrote

>I haven't seen many HYSAs lately

I don't understand this. What do you mean? That's exactly where it should go.

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jammun14 OP t1_j2drqgv wrote

I know it should, but do you have recommendations? When I research I don't see any that are very high, recent posts seem to have the same thoughts, or I don't trust the "bank" as I've never heard of them

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SmoothCriminal2018 t1_j2ds0pl wrote

Capital One, Ally, and Marcus (Goldman Sachs) are all reputable banks currently offering good rates on their savings accounts! There are more too, those are just the ones I know off the top of my head

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AdditionalAttorney t1_j2e0k2h wrote

What is your definition of high?

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SmoothCriminal2018 t1_j2e1045 wrote

Currently around 3-4%, but obviously what constitutes high changes based on what the Fed funds rate is at the time and in comparison to other banks. Some places are higher but make you jump through hoops to get it (you have to refer people, make a certain number of transactions per month, etc)

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KCPilot17 t1_j2druj9 wrote

I personally use Amex, but there are dozens of them out there.

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ZuffleZ06 t1_j2dyayi wrote

My ally account is over 3% I believe and I haven't had any issues with them.

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93195 t1_j2drr2o wrote

If you havenā€™t ā€œseenā€ many HYSAs lately, then you havenā€™t been looking. Thatā€™s where it belongs. Quick and easy to open one from a highly rated company on this list:

https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts

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jammun14 OP t1_j2dtg1x wrote

Thanks for the list! The one I looked at before didn't have any banks I'd heard of and all were <=2%.

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NorthofDakota t1_j2e2824 wrote

High is relative. Regular savings accounts pay something like 0.01%. HYSAs are tied to the federal rate, so even 0.3%, which is what they were about a year ago is 30x higher.

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MountainStoneMist t1_j2dscm9 wrote

Don't think of an emergency fund as an investment, it's insurance. I don't agree with Dave Ramsey's views on investing, but I do agree with his view on emergency funds: https://youtu.be/fVToMS2Q3XQ

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jammun14 OP t1_j2dsin2 wrote

Yeah I definitely don't want to invest it, hence the refusal for CDs or bonds. Ultimately I want it to be out of sight but easy to access in an emergency. The interest is just icing.

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726372816482 t1_j2dvppn wrote

Generally CDs have very minor penalties for withdrawing early such as reversing the last 2 or 3 months interest they pay out. IBonds are fairly similar as well. Just wanted to point that out, good luck!

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ku91fanatic t1_j2e4kfn wrote

One further point to this is that there are brokered CD's that offer full liquidity and higher rates. Brokered CD's function the same (guaranteed rate, FDIC insured, etc) but there is a market for them to be sold if you need your cash back. There is interest rate risk (as rates go up, the underlying value will go down. But if you hold to maturity then you receive a full return of your principal) but with short durations, the impact is negligible.

I am seeing 3-month CD rates north of 4% and the 1 & 2 year CDs are at ~4.65%.

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RedBaron180 t1_j2fxart wrote

I opened HYSA with ally. I also opened a checking acct with them so it would give me instant access if needed.

Then forgot about it.

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jammun14 OP t1_j2fxiyp wrote

Ally seems pretty popular, so seems fairly user friendly?

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[deleted] t1_j2ehogq wrote

Whatā€™s his views on investing. Iā€™ve only seen his steps.

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CelticsWin7 t1_j2dspyb wrote

Move it to a HYSA. There are plenty offering over 3%

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Rourk t1_j2dvor0 wrote

I keep mine in a separate banks savings account and hve it linked for emergencies. With the way things have gone the past year Iā€™ve needed it

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jammun14 OP t1_j2dvwux wrote

I hope your new year is filled with success and peace

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NOPNOFNOG12 t1_j2dygu2 wrote

Citi is over 3% and also offering a bonus for new money deposits so you can get a couple hundred extra right away depending how big you e fund is

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MikeT1385 t1_j2e6rpr wrote

HYSA will do. I use AmEx and get 3.30%

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polkawombat t1_j2eezp1 wrote

My experience with Ally has been great. They increased their HYSA rate 18 times this year, from 0.5% to 3.3% (like most of the banks that keep popping up here)

This is probably a good time to be looking at longer-term CD's. I keep a portion of my e-fund in a 5-year CD ladder with Ally. I started by opening 5 CD's (1, 2, 3, 4, 5 year terms) at the same time. At renewal I rolled each one into a 5-year term and add additional funds. This has smoothed out variations in interest rates. I've never needed to, but if I needed some of those funds I could do so and only pay the 3-month interest penalty on one of the CD's.

With higher interest rates it's even been worth it to break the lower interest rate CDs, pay the penalty, and buy higher rates with similar maturity dates.

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jammun14 OP t1_j2efskc wrote

I thought about doing that rolling schedule with CDs before too, but with a different set of funds. I like the way you explained it!

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polkawombat t1_j2eklny wrote

Yeah, when I was just starting it was just an experiment with not much money. Once I understood it better I started treating it as part of my e-fund

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MiLKShaKes_EpiDerMis t1_j2e0lfa wrote

Redneck Bank has a money market account with 4.25%. Theyā€™re a subsidiary of All America Bank and fully legit (check reviews on Doctor Credit). Iā€™d keep money there- they have higher rates than the usuals (Ally, Discover, Cap One).

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lakehop t1_j2ebq4i wrote

Hard to take them seriously with a name like that.

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OneAsparagus69 t1_j2eo5qo wrote

4-week T-bills are paying almost 4% right now, so I've moved some e-fund money into a 4-week T-bill ladder. I've got some longer-term e-fund money in savings bonds which are between like 6.5-9.5% right now.

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lraxton t1_j2e6ji1 wrote

I hardly ever see people mention this one, but Iā€™ve been very happy with Lending Club. Itā€™s currently at 3.6%

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jammun14 OP t1_j2eae26 wrote

That's one I was looking at from the nerdwallet list! What's your least favorite part of that one?

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Wan_Haole_Faka t1_j2ekero wrote

Ally is giving like 3.3% or something now. I just opened an account with them. I think I'm going to slowly buy into I bonds in order to build up 50% of my emergency fund.

Who cares if you've never heard of it before? Just make sure they're FDIC insured.

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jammun14 OP t1_j2elxzd wrote

Yeah that was the problem is they weren't that either. Ally seems to be a pretty popular one

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Wan_Haole_Faka t1_j2ewt80 wrote

Plenty of good options are FDIC insured. Ally is I believe up to $250,000.

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the1katya t1_j2f0uj0 wrote

I normally keep a small amount of savings in my main bank with my checking to cover overdraft or additional bills, and I transfer the rest to a HYSA for my emergency fund so I feel like I'm poorer than I am. I use Discover HYSA and they are really user friendly. Use Nerdwallet to research to find your best account for your situation. They have great detailed breakdowns of HYSA fine print including fees, minimums, and customer reviews. Once you set up a new account I strongly suggest having a portion of your paycheck DD or autodeduct from you checking to continue to build savings.

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beyondo-OG t1_j2f7pjw wrote

I agree that an emergency fund should be readily available, sort of...

I will always have 10-15K in a MM acct, that I can get to at any time. But I use my available credit for the remainder of my emerg funds. I have a 15K limit CC and a HELOC. No balance on either.

Set up rolling CDs using your emergency cash so you have one expiring each month, that way if you have a big unexpected expense you charge it, or borrow on your HELOC and use the CDs to pay it off over a few months. Worst case you're out a few months interest. In the mean time you're earning good interest on your emerg money.

BTW, my local credit union is offering 4% 6 month CDs right now. I would think that rate would be readily available anywhere...

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jammun14 OP t1_j2f820p wrote

That's a good idea. I think for most immediate emergencies I probably would use my credit card. Now you've set my brain into active mode!

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YdoModsTouchKids t1_j2fmyac wrote

I've got a 52.4 month emergency fund in the credit union, it's staying there. I don't trust online only banks, I want to be able to go physically pull $50k if I want to, no ATM machine is doing that.

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jammun14 OP t1_j2fpxnz wrote

My mom said she didn't trust online banks either lol my measly 6 months is nothing to 52!

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Otowner98 t1_j2ea5iw wrote

Iā€™m getting 3.30% from Capital One. It ticked up, 30 basis points, since I opened it in November.

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bravebird46 t1_j2eccqq wrote

Iā€™m at Personal Capital which is currently 3.8%

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uuuseful t1_j2eqket wrote

I just keep rolling 6 month tbills in fidelity. 1/3 of it releases from ibonds in March which I'll sell in July and move to more tbills.

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ChiSquare1963 t1_j2eu8o1 wrote

Mine is split. A monthā€™s expenses in local credit union savings, with the rest in HYSA and I-bonds. I donā€™t expect to need all the money at once, so Im okay with waiting a week or so to get money from online bank and Treasury Direct.

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Urban-Elderflower t1_j2f7emj wrote

I was browsing this list, linked on another thread this week. https://www.doctorofcredit.com/high-interest-savings-to-get

My HYSA is at 3.75% this week. If it doesn't go up again by February I'll consider moving. My Savings Direct was good enough to start saving with; I only left for the current bank when MSD stopped keeping up.

Have learned that the ones that raise rates fast often also drop them fast or have other disincentives. Only you can decide how much time and effort you want to put into researching a network of banks and moving your money around among them.

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jammun14 OP t1_j2f87uh wrote

Yeah thats one thing I was worried about. I dont really have the energy to do that, wish I did though! Thanks for the list!

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Cluedo86 t1_j2fodje wrote

Keep it in a separate savings account, preferably an online one that pays better interest than the piddly .10% most local banks/credit unions provide. You need the EF to remain liquid.

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Fantastic_Regret_854 t1_j2fvp3c wrote

Not sure why all the hate but Sofi has a HYSA at 3.5% plus a $250 bonus if you direct deposit.

$10k and you direct deposit $1/paycheck and you earn $600 while it sits for a year in case of emergency.

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jammun14 OP t1_j2fw2p9 wrote

I dunno either! But all the specific recommendations have been helpful. SoFi was one I was looking at today, do you find it's user friendly?

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kboogie82 t1_j2e45pj wrote

Look into bank account bonus hunting. I've made $12.5k over the last two years opening up 50+ bank accounts.

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hereparaleer t1_j2drlcm wrote

Uh check out citibanks HYSAā€¦ it increases itā€™s % every month almost. Unless Iā€™m missing some glaring issue, Iā€™ve been loving the 3.4%!!

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MuyEsleepy t1_j2dvahi wrote

How do I get it with citi Iā€™m not seeing the reset advertised

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jammun14 OP t1_j2drt3a wrote

Thank you! I've never been able to find one I feel comfortable with or has more than 2%

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bros402 t1_j2dtanc wrote

....what

Citibank, Ally, Marcus, Capital One

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hereparaleer t1_j2dwdi3 wrote

Of course!! Sorry for the other snarksters, Iā€™d had my coffee šŸ˜œ also congrats on your savings goal!! Just in time for a new one hahah

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jammun14 OP t1_j2dwj5e wrote

Yeah already starting to plan that one šŸ˜…

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