Question for Savers/Emergency Account

[Nebraska_Disney]

For those who keep 6+ months of savings on hand for emergencies, do you generally just keep it in savings and earning so little interest that it bugs you like it bugs me? I have a savings account which is acting as an emergency account, but it pains me greatly to have the money sitting there and making me no money due to the historically low interests rates we are seeing. I'd prefer to put this money to work for me, but in something safe and something liquid. I have looked at various Vanguard mutual funds, money market accounts, etc and wondering what others do?

 

[pjlla]

I'll be honest and tell you that a hunk of my "emergency" fund is cash.... well hidden in a fireproof box.... but cash. No sense in having it where I cannot have quick access in case of a true emergency. The rest is in a standard passbook savings. I will also admit that it probably isn't a full 6 months..... just never seemed necessary to have THAT much in liquid funds............P

 

[tvguy]

Sure it bugs me, but almost every other investment option includes a risk of losing money. The whole point of that 6 month's savings is to get you through a financial crisis with immediate cash that you know will be there.
I do miss the 16% 100% full insured CD's at the Banks from the 1970's. Of course in those days if you were borrowing money, you paid a high rate too. But at my age and point of my life, I don't ever expect to have to borrow money again in my life time, so I don't care about loan interest rates anymore.

 

[OrangeBirdGirl]

I do not invest it as PP mentioned most investments you risk losing money.

I put about half of my emergency fund into multiple CD's. The interest rate is very low but I think it's just more of convenience that I will open a CD if a see a special and then when the term is up I just let it roll to the current interest rate. If I need to access the money all that I am penalized is possibly 30 - 90 days interest.

The remainder I just keep in a regular savings account.

I have checked into money market as well and would consider it, but the CD rates I'm getting is higher.

 

[DrummerBoy523]

For those who keep 6+ months of savings on hand for emergencies, do you generally just keep it in savings and earning so little interest that it bugs you like it bugs me? I have a savings account which is acting as an emergency account, but it pains me greatly to have the money sitting there and making me no money due to the historically low interests rates we are seeing. I'd prefer to put this money to work for me, but in something safe and something liquid. I have looked at various Vanguard mutual funds, money market accounts, etc and wondering what others do?

I've got 2 months house payment and utilities in cash in a safe in the house.

I've got about 2 more months expenses in a money market that I regularly add money to when we have a monthly surplus.

I'm working on having 4 months of ER funds in a MM and the other two in cash. Hope that helps.

 

[Gigi22]

Right now I have most of my emergency funds in a savings account, as the OP does. I have a smaller cash reserve that is easily available, largely because we were advised to have cash on hand in the event of large blackouts and natural disasters. Honestly, I don't really mind the low rate of return, I am just glad I have emergency funds.

 

[Albort]

i keep some of my fund in prepaid cards since they earn me 5%. I also have another credit union that earns me 3%. everything else i dont use/stashed away is with ally bank earning 1%. I also have some with Charles Swhab due to their waived atm fees anywhere in the world.

all these accounts do take a few days to transfer back and forth, or have fees if u actually do use them. but i guess emergency funds isnt needed asap.

 

[Madivan]

We have higher interest (relative to the basically 0% at BoA or similar) online accounts and it sits there.

We don't do 6 months as we are a dual income family and both in a very stable industry and well networked so we do 3 months. We also don't do a full 3 months of our current budget as we have a lot of fluff in our budget and we cut some of thay for our E fund budget. It's 3 months of no fluff budget, pretty much exactly what we lived on my mat leaves so we know it is more than doable. But you didn't ask about the amount...sorry for the tangent.

My point was that if I did full 6 months I'd probably look for alternative places to keep part of it. I'd probably keep 2 or 3 months very liquid in a basic account and the rest somewhere that would earn more but not too high risk, perhaps a mutual fund but that's just a guess as I'd have to look into options first.

 

[Southernmiss]

Right now I have most of my emergency funds in a savings account, as the OP does. I have a smaller cash reserve that is easily available, largely because we were advised to have cash on hand in the event of large blackouts and natural disasters. Honestly, I don't really mind the low rate of return, I am just glad I have emergency funds.

This.

Murphy hit us hard this year and we are rebuilding our emergency funds. But so glad we had it when we needed it. Our family had to buy 3 new to us cars, out of 5 drivers, ds needed an appendectomy, replaced our roof due to leaks, unexpected new tires needed, refrigerator went out and a variety of other things.

Hit us 3 years ago, too. But the peace of mind to easily access the funds while daggers are coming your way is worth the minimal interest or dividends we might forgo.

 

[DVCcurious]

This.

Murphy hit us hard this year and we are rebuilding our emergency funds. But so glad we had it when we needed it. Our family had to buy 3 new to us cars, out of 5 drivers, ds needed an appendectomy, replaced our roof due to leaks, unexpected new tires needed, refrigerator went out and a variety of other things.

Hit us 3 years ago, too. But the peace of mind to easily access the funds while daggers are coming your way is worth the minimal interest or dividends we might forgo.

Sorry to hear that. I was watching hurricane Murphy on TV up here in New Jersey praying it wouldn't hit us like Sandy did in 2012. We also had flooded cars that had to be replaced, so I understand how a hurricane can really wipe out an emergency fund fast.

 

[Southernmiss]

Sorry to hear that. I was watching hurricane Murphy on TV up here in New Jersey praying it wouldn't hit us like Sandy did in 2012. We also had flooded cars that had to be replaced, so I understand how a hurricane can really wipe out an emergency fund fast.

Oh no, Murphy wasn't a hurricane but a term for unexpected bad stuff happening. ' Murphy's law'

Matthew was the recent bad hurricane, but it wasn't close to us. And yes, natural disasters can happen to anyone. Emergency funds are necessary for everyone.

 

[Nayan]

i keep some of my fund in prepaid cards since they earn me 5%. I also have another credit union that earns me 3%. everything else i dont use/stashed away is with ally bank earning 1%. I also have some with Charles Swhab due to their waived atm fees anywhere in the world.

all these accounts do take a few days to transfer back and forth, or have fees if u actually do use them. but i guess emergency funds isnt needed asap.

I would be leery of keeping emergency money on prepaid cards. If the power is out and you can't use credit cards there's no way to access that money because there's no readers to read them.

 

[Albort]

I would be leery of keeping emergency money on prepaid cards. If the power is out and you can't use credit cards there's no way to access that money because there's no readers to read them.

but u cant collect interest when its in a shoebox...
granted, u should keep some money stocked up in your house just incase...

edit: also, prepaid cards are the only accounts i can find that give u 5% returns...

 

[QueenIsabella]

We keep our emergency funds in a money market account. You're right about the super low interest, but I just don't think about the account at all.

We keep a few hundred dollars in cash in the house. We used to keep more, but we've never, ever used it in 25 years, so I figured it was okay to pare back and put it in savings. I did make an extra ATM run before Matthew hit, but again, we didn't need it.

 

[barkley]

I've got 2 months house payment and utilities in cash in a safe in the house.

I have a smaller cash reserve that is easily available, largely because we were advised to have cash on hand in the event of large blackouts and natural disasters

i keep some of my fund in prepaid cards since they earn me 5%

We don't do 6 months as we are a dual income family and both in a very stable industry and well networked so we do 3 months.

some suggestions-

love the safe concept (want to get one but still trying to figure out best type-the digital ones concern me, if you can make any suggestions I would appreciate it) but make sure to have some funds offsite that you can access as well-in a disaster with your home you may be evacuated and unable to enter it under any circumstances. we were evacuated from our home due to a roof collapse-fortunately it was only a day or two before we were permitted to reenter to gather emergency items, but I've worked with the public who have been barred by law enforcement from reentry for MONTHS (initially 'red tagged' properties that took months to get formal evaluations done on and the homeowners/renters were left in limbo with all their property sitting just out of reach).

cash and prepaid cards-big fan of the cash concept b/c when our area was hit with a record breaking windstorm last year there were businesses whose generators were able to keep them operating BUT we had HUGE areas without the capability of conducting any business with 'cards' for upwards of weeks. it was a cash only way of life for allot of people-and if you didn't have cash on hand you had to wait until your bank reopened (hopefully you had your funds in one that had a brick and mortar location locally) to get cash.


I never saw the need for the full 6 months either b/c both dh and I worked in a very stable industry-what changed my mind on how we did our emergency fund (esp. when our kids were young and more reliant on us/certain services) was 2 tragedies with co-workers, both who were in the same boat as dh and I (dual income/secure jobs)-

1st was coworker who along with her dh and 2 kids got into a NASTY car accident. broken bones for all such that both parents were off work for several months recuperating and helping their kids recuperate. one income stops and costs can be cut-both stop, all sick time and vacation time is used up, family/friends help to the extent they can........but they reach the limits of how much they can help-and it was financial disaster for them.
this taught us the value of looking into long term disability coverage for both dh and I. as it happened I did become disabled a dozen or so years later and this income helped tremendously w/ the ADDED expenses that people don't realize can come with an unexpected disabling event.

2nd was another coworker-same situation but no kids, however she was 8 months pregnant. 8 months pregnant when she walked into her bedroom to find her mid 30's dh in full cardiac arrest. he was gone before she got through to 911. totally out of the blue-no history of heart problems. she was quite understandably A MESS, and she not only was looking at a reduction in income-she was looking at an increase in expenses (childcare and the costs of a child in general).
this taught us the value of life insurance (they had none, she lost EVERYTHING). we've always had enough to ensure that monetary concerns wouldn't be an issue for either dh or I to deal with if something happened.



I think you set up your emergency fund the way it works best for you-

for us it includes life insurance (and money in the fund to ensure those payments continue to be made monthly in the event of loss of income), 'the e/r fund' (part in easily accessible cash, part in money market at local brick/mortar credit union)-enough for several months of our regular budgeted expenses, additional amounts equal to (1) our homeowner's insurance deductible, (2) our auto deductibles, (3) an amount for 'alternate lodging/living'-when our roof collapsed we were in a hotel for a week, had to eat all our meals out, buy toiletries and clothes (couldn't get our stuff from home until allowed back in for a few minutes to gather 'essentials'-read mostly meds). our insurance covered this b/c we pay extra for this type of coverage BUT they only pay AFTER we hit our deductible (about 2K) AND they took several weeks to issue payment.

 

[chris31997]

Our emergency fund is kept in 2 different money market accounts. We would love to earn more on it but it is insurance for when life hits. And life has happened.

 

[Gigi22]

I would be leery of keeping emergency money on prepaid cards. If the power is out and you can't use credit cards there's no way to access that money because there's no readers to read them.

Yes. In recent memory we have had two major power outages that went on for days (and in some nearby areas, weeks) meaning that ATMs were out. Brick and mortar banks were closed. Card readers at many locations had no power, including those at gas stations. Fortunately we had a small stash of money. Many didn't.

For all those who don't ever even carry cash on them, you may want to rethink that. Stuff beyond your control does happen.

 

[tvguy]

Yes. In recent memory we have had two major power outages that went on for days (and in some nearby areas, weeks) meaning that ATMs were out. Brick and mortar banks were closed. Card readers at many locations had no power, including those at gas stations. Fortunately we had a small stash of money. Many didn't.

For all those who don't ever even carry cash on them, you may want to rethink that. Stuff beyond your control does happen.

My wife's step mother had that issue after Rita hit Texas. They were without power for 6 weeks. But she could use her credit card, the merchants just whipped out the old credit card imprint machines.

 

[Albort]

My wife's step mother had that issue after Rita hit Texas. They were without power for 6 weeks. But she could use her credit card, the merchants just whipped out the old credit card imprint machines.

i think 80% of my credit cards dont have the imprints now... i wonder what they would do now haha.

 

[wulfgeat]

some suggestions-

love the safe concept (want to get one but still trying to figure out best type-the digital ones concern me, if you can make any suggestions I would appreciate it)

Our digital safe also has a key. The keypad twists off, and there is a place for a key behind it. If I recall, it is just under 3 cu ft, about the size of a minifridge. We have had the same safe for about 15 years. We had to replace the keypad about a year ago. It is a Sentry safe.