The Top 4 Tips On Where To Keep Your Emergency Funds

A financial emergency can strike at any time, but it’s important to be prepared. Whether it’s a car accident, sudden illness, or death in the family, an emergency fund can help you cover these unexpected expenses should they arise. If you don’t have a rainy day fund set up, here are four tips on where to keep your emergency funds so that they’re accessible when you need them most. 

Open A Savings Account

Most people don’t have the money to cover emergencies in their checking accounts, so it’s important that you have a savings account. Ideally, it should be separate from your normal checking and shouldn’t be easily accessible. In this way, you’ll prevent yourself from using that money for non-emergency expenses. It is a great place to keep your emergency fund because it’s easy to withdraw money from without causing a lot of problems. According to the investment experts at Money Mash, the benefit of having more than one savings account is that you can keep separate emergency funds in each account depending on the type of expense. For example, you may want to have a health care fund and an auto repair fund set aside. That way, when money’s tight or you need to make a payment, your money will be there when you need it most. Another benefit is that it’s less liquid than other investments, so you’re less prone to taking out money just because you can.

Benefits:

• Easy to use in an emergency
• Budgeters can easily track expenses monthly
• Less likely to be accessed for non-emergencies
• No minimum balance requirements

Set Up A Line Of Credit

If you don’t have a savings account or cash to set aside, then consider setting up a line of credit. A line of credit works similarly to a credit card in that you can deposit money and then withdraw money when needed. The benefit of having a line of credit is that you can have reliable access to your funds without having to pay outrageous fees for each withdrawal. It’s important, however, to select a line of credit that has low-interest rates and reasonable terms. To avoid fees, it’s best to pay off your balance in full every month. You may want to set up a separate line of credit for your emergency fund that has its own bank account attached to it so you can more easily transfer your funds. This is especially beneficial if the line of credit doesn’t have check-writing privileges.

Benefits:

• Easy to use in an emergency
• You can track expenses monthly and see how much money you have available
• Accessible from any ATM or bank with check-writing privileges
• Low-interest rates

Keep Cash On Hand

Another safe way to keep your emergency fund is through more liquid means, such as cash. Depending on how much you need to save, this could be in the form of paper money or a bank draft. If you choose to use cash, it’s important that you keep it in a secure location such as a safe deposit box or another place where it won’t be easily lost, stolen, or damaged. Keeping your emergency fund in cash is a great option because you can always access it, transfer it, or deposit it with very little effort on your part. However, the downside of keeping cash is that you’re less likely to save because it’s more tempting, and there are higher rates of loss or damage. For this reason, it’s best to keep a small amount of cash or the minimum amount you need for your emergency fund in cash. The rest of the funds should be set aside in other investments that won’t tempt you to spend it.

Benefits:

• No monthly fees or minimum balance requirements
• More liquid than other investments
• Easily transferable and accessible if needed
• Can deposit directly at bank or ATM

Keep It With Your Stocks

If you’re apprehensive about keeping all of your emergency funds in a savings account, line of credit, or cash, then consider investing your emergency fund in stocks. This is a great option if you’re looking for more liquidity and want to earn interest from your emergency fund. When you invest in stocks, you can take advantage of the dividends that are paid out each month and reinvest those funds for even more growth. You can also make wise decisions with your stocks to ensure a constant stream of income, which is especially beneficial in retirement. This may be a smart option for you if you’re already invested in the stock market and are looking for a way to diversify your portfolio. If not, it may be wise to invest your emergency fund in a diversified portfolio of high-quality stocks.

Benefits:

• Earn interest from dividends
• Can be used in an emergency while still earning a return on investment
• May provide a stream of income for retirement
• More diversification in the portfolio
• Possible to buy stock with a small amount of emergency money and reinvest dividends for growth
• Great way to budget funds for emergencies
• You can sell stocks with little cost and loss
• Can take advantage of special opportunities (like IPOs) to further diversify your portfolio

The article provides a few solid tips on where to keep your emergency funds. Some of the most important aspects are making sure you have access to it when necessary, keeping it safe and in a place where it won’t be easily lost or stolen, and finding a way to budget it so that you can still profit from interest while having access to the funds when needed.

The article also provides guidance on what types of investments you can make with your emergency fund, especially if you’re looking to add more liquidity. The most important thing is to make sure you thoroughly research your investments so that you can be confident in your decision.

Finally, it’s also important to make sure you’re diversified instead of just keeping all of your money in one place that could falter if the economy tanks. Keeping it invested in stocks and bonds will help give you a steady stream of income, even when times get tough.