What’s the best way to hold an emergency fund?


Find out the best way to keep an emergency fund
Learn how best to run an emergency fund

Life has its difficulties; Things happen. What if you suddenly lost your job? Do you have enough savings to cover the expenses you need to keep you and your family afloat until you find a new job? The loss of jobs on top of a million other potential emergencies is why everyone needs to have an emergency fund.

Nearly 25% of Americans have no emergency savings, and nearly half of Americans could handle a $ 1,000 emergency just by immersing themselves in savings. You need a place where you can safely store and set up your emergency money. We’ll examine the best way to get an emergency fund, plus the pros and cons of each one.

What’s the best way to run an emergency fund?

The best way to keep an emergency fund is to separate it from your other regular checking and savings accounts. If you’re looking for the best way to keep an emergency fund – aside from hiding it under your mattress – these economy vehicles should be considered.

High yield savings account
A high-yield savings account is a bank account that you can deposit money into and usually earn a higher rate of interest on your deposits. What does that mean? This means a better return on your deposits. The interest rate is what the bank pays you to keep your money in that account.

Some banks may require you to make large deposits to open a high yield savings account. Additionally, you may need to maintain a large balance to avoid fees, earn interest, or keep your account open. If you are interested in a high yield savings account to best run an emergency fund, make sure it is one that offers the best return without having to worry about it.

Here are possible pros and cons:


  • Potential for better returns
  • The funds are easily accessible
  • Funds can be quickly transferred between linked accounts
  • FDIC-insured bank or credit union offer security


  • Check writing limits
  • Not an ideal investment with 1-2% rates
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  • Higher interest rates usually have an upper limit after which you will no longer receive interest on the higher interest rate

Money market account
A money market account is like a high yield savings account, but has functions similar to a checking account. It usually comes with checks or a debit card with a limited number of monthly transactions. A money market account is a deposit account that pays interest based on current interest rates.

Possible advantages and disadvantages:


  • Depositing funds or transferring funds between linked accounts offers convenience and flexibility.
  • Due to the functions of the current account, large costs can be financed quickly and without great effort.
  • The interest rates are competitive, much like a high yield savings account.
  • You can get security from an FDIC-insured bank or credit union.


  • Some banks may have higher minimum balance requirements.
  • While some accounts may offer great interest rates, others may offer an APY that is similar to a traditional savings account. Another option is to qualify for a higher rate by reaching a certain minimum balance first.
  • Banks may charge monthly maintenance fees for an open account, but it may be possible to waive the fee by meeting the daily balance or direct deposit requirements.
  • While these accounts are subject to the restrictions of Federal Ordinance D, i.e. six withdrawals per month, banks can impose internal restrictions.

Payment slip
Certificates of deposit (CDs) are usually issued by commercial banks which restrict access to invested funds but offer much higher interest rates. When you open a CD, you need to select a period of time. The terms can be between three months and five years, with longer terms usually offering higher interest rates. If money is withdrawn before the expiry of the term, there are usually penalties.

Here are possible pros and cons of using a CD as the best way to run an emergency fund:


  • CDs are offered by FDIC-insured banks and credit unions.
  • They offer better returns than savings.
  • Fixed, predictable returns; CDs deliver a certain yield within a certain period of time.
  • There is a wide variety of terms available for investors to choose a term that best suits their needs.
  • There is a wide variety of account options such as: B. Non-penalty CDs, which allow savers to get a better interest rate and close the account without penalty.


  • Due to limited liquidity, savers can have difficulty accessing funds in times of need and typically have to pay an early withdrawal penalty.
  • Since the interest rates are fixed, there is a risk of inflation.
  • The returns are typically lower than other higher risk asset classes.
  • There is a risk of reinvestment in CDs. When interest rates go down, savers who have set an interest rate will have to invest in CDs with lower yields when their CD matures.
  • Savers have to pay taxes on accrued interest.

Traditional bank account
We can add traditional bank accounts to the list of the best ways to run an emergency fund. Here are some pros and cons of traditional reports:


  • They are easily accessible and can be withdrawn at any time.
  • You can access your account online or go to a brick and mortar bank or credit union, whichever you choose.
  • Your money is safe with FDIC-insured banks or credit unions.


  • Traditional accounts have a low return, and you won’t see the same return as other account types.
  • Interest earned is taxed as ordinary income.
  • Withdrawing funds is easy anytime, even if it’s not an emergency.

The best way to hold an emergency fund

There isn’t a single best way to run an emergency fund, and regardless of what you choose, you can always choose from more than one option. Allocating money to different accounts gives you several options for funding your emergency.

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