Savings Accounts for Emergency Funds

We have discussed in a couple of recent posts the need to have a savings account for your emergency fund.  There are a multitude of choices where you can save those funds.   We are going to focus on two primary options: local financial institutions and on-line financial institutions.  Both are valid options.  It will come down to what you are comfortable with.  We will explore both options to help you with your decision.

A local financial institution can be a bank, savings & loan, or credit union in your community.  Any bank account you open must have deposit insurance.  For banks and savings & loans, the insurance is through the FDIC.  For credit unions, the insurance is through the NCUA. A local institution is going to offer you convenience.  You will have almost immediate access to your money in an emergency.  The tradeoff for that convenience is a lower annual percentage yield (APY) in most cases.

The other option is finding an online savings solution.  Again, you want to make sure the account is insured by the FDIC or the NCUA.  The primary advantage is the APY will be higher than a local financial institution.  The tradeoff is the increased time it will take to access your funds.  It could take 1-2 days.

Some online institutions to consider:

• Ally Bank
• Capital One 360
• Discover Bank
• Synchrony Bank

These are just a handful of options available.  You can search online for other options.  Be sure to research thoroughly.

You will also need a local checking account where you can transfer your emergency funds when you need access.  An important consideration is how to get the funds into your emergency savings? I highly recommend that you automate the process.  You can have the money directly deposited from your paycheck each time you are paid, or you could set up an automatic transfer from a local financial institution.

Like in many things, the hardest step is the first step.  It is also the most important step to get you started on the path to a fully funded emergency fund.

Whether you use a local financial institution or an online bank, choose one and get started.

Take the important first step to save money your way.