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So it's not just sitting there. I might as well just hide it under a mattress. I want to do something with it. Maybe not all of it so that I don't have to pay early withdrawal penalty if I need 3-4 months worth of money.
Agreed, the whole point of an emergency fund is that it is just sitting there in case of an emergency, with no volatility. Mine is in a savings account earning the highest savings rate I could find, about 1%. Unfortunately ZIRP is punishing savers right now.
My emergency fund is the ING Direct "High Yield" savings account, paying 0.8%--every time I look it's gone a little lower. I guess I could move it to Ally bank for 0.89% but it's really not worth the bother.
I remember when a savings account paid as much interest as junk bonds are yielding these days.
For general emergencies (unexpected bills, car repairs, job loss, or the storm blows a tree down on your house), I suggest I-Bonds since they're a much better hedge against inflation than simply leaving it in a bank. I remember, once upon a time, you didn't scientific notation to see what your interest rate was on your checking/savings accounts. But they can be redeemed after 12 months (sacrificing 3 months of interest; which is miniscule at today's rates) but still pay up to inflation.
For the SHTF fund - the power's out and the zombies are one block away - I'd still keep a few hundred bucks stashed somewhere. But that's entirely your prerogative.
in the first 5 years you will forfeit 3 months interest if you need them for an emergency plus you first have to cash them in . the money is not accessible right of way.
not worth the trouble in my opinion.
emergency money is just that, it should be in place ready to be withdrawn on the spot if needed.
Credit union checking account 3% if you use your debit card 12 times per month. So I dump most of non retirement money into it.
If that is working for you... that's great. But most people are well advised to segregate this
specific and calculated amount of VERY liquid (or even cash) reserve from any other cash they have.
The temptation to dip into it for reasons far below the threshold of "emergency" can be hard to resist.
Wall it off... and never the twain shall meet.
Some cash on hand? You bet.
More than what you'll need for the month or so it takes to realize that you're really in a mess? No.
Just enough to get by on until the next CD matures.
Then get by on *that* amount of cash for the 30-60 days until the next CD matures.
You really don't want to make it easy to get at the whole pot at once.
God forbid you ever need to... then you pay the early withdrawal penalty.
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