Right now, the main goal that I’m working on is establishing a $10,000 emergency fund. Just in the past week I’ve experienced some setbacks (more on this next week) but, nevertheless, the issue of piling up cash is at the forefront of my financial mind. The thing is, although I’m cognizant of the amount I want to have saved, I don’t think very often about the vehicle in which I’m stashing my cash.
Since a very popular online bank (which shall remain nameless) that I use for my emergency savings has recently – much to my chagrin – been bought out by another large bank (which will also remain nameless) I’ve been on the look-out for another good bank to move my money to, such as BM Savings. But then I started thinking a little outside the box: what if I just abandoned the idea of using a conventional savings account altogether? I realized that, for a personal finance blogger, I have embarrassingly little knowledge about non-traditional savings vehicles, so I decided to do a little research.
It turns out, there are lots of options out there when it comes to parking your cash in a stable, easily accessible vehicle. For example, money market accounts and certificates of deposit. Both offer a higher interest rate than a traditional savings account, and both will keep my money relatively safe (money market accounts are a bit riskier than CDs, but are still pretty stable). The main problem with money market accounts is that they usually have a pretty high minimum balance requirement – sometimes as high as $10,000. Similarly, CDs are usually purchased in a fixed amount – the interest grows steadily, but you can’t exactly add to a CD once you purchase it. So in terms of flexibility, these accounts aren’t quite as advantageous as a regular savings account.
But what about once I hit my $10,000 mark? Won’t I want that money to be working a little harder than the piddly .80% interest I’m making right now? It might feel good (you get the personal finance warm and fuzzies, don’t you?) to put part or all of that money into one of the best fixed rate bonds online. I’d be getting a stable rate of return and my money would be pretty safe. I know that emergency funds aren’t supposed to be an “investment” exactly, but it just makes me sick to think about how hard I’ve worked to accumulate this cash, only to have it basically collect dust in a regular savings account.
Am I crazy to be thinking about putting my emergency savings in an unconventional savings vehicle? Where do you park your emergency cash?
