One of the essentials of successful finances is the emergency fund. Your emergency fund can provide a measure of protection and security from financial setbacks. When you have an emergency fund, you can draw on it when you need extra cash for a medical emergency, or when you need to partially offset a job loss. As you build your emergency fund, though, one of things you have to decide is where you will keep your money.
Here are some of the options for your emergency fund.
The savings account is a tried and true way to save up your emergency fund. The best option is a high-yield savings account, since the yield you get with a brick and mortar account is going to be minuscule.
If you want to boost your yield a little bit, you can consider a CD ladder. With this method, you regularly access CDs as needed.
If you want limited access to your money, and slightly better rates, a money market fund can be a good choice.
With the current economic situation, many consumers are turning to their retirement accounts for emergency money. If you have a Roth IRA, you can withdraw your contributions at any time, without penalty. With a 401(k), you will need to borrow against the account.
Grow your money faster, and access when it’s needed, but be wary of possible losses.
Where do you keep your emergency fund?
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I'm just an average mom, trying to live a frugal life and get out of debt. I write about things that have (and haven't) worked to improve my family's financial situation. What works for me may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
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