Emergency Fund Accounts – Personal Finance Basics

As a financial consultant, I’ve coached many people on why emergency funds are important. You can get more information by searching Google, or check our resource links for budget spreadsheets and other financial calculators. In the previous post you learned important personal finance basics about starting an emergency fund like budgeting, goal setting and automation. Today I’ll go over three quick tips to help you decide where to start your emergency fund.



Convenience – If you’re like most people, you want to make saving into an emergency fund as seamless and easy as possible. Coaching personal finance basics has taught me that if it’s not easy, it usually doesn’t get accomplished. You likely have a checking account. If so, you probably have a savings account attached, or could open one online or at your branch. If so, I would suggest using this venue to park your emergency funds. You may not get the best interest rates, but it’s an account you already have, or can set up in a jiffy.

High interest Savings – You shouldn’t be too concerned with the interest rate earned on your emergency fund as it’s considered a short-term investment. A personal finance basics rule of thumb is that you’ll likely draw from the fund within the next 5-7 years, it’s short-term. ING is one very popular savings vehicle, as is PC. There are various high interest savings accounts available that you can open online, just be careful of their fees, terms and conditions. Money market funds are another option, and sometimes provide higher interest than savings accounts, but are not guaranteed. I have personally used ING for savings and found it to be pretty good.

Liquidity – How quick can I get my money? Another important factor you should consider is how accessible are your emergency funds. The basic rule here is that it should be available within no more than 5 days at the very most. You should aim for a fund that could provide you with your money within 24 hours of an emergency. The personal finance basics question to ask yourself here when choosing an account is “if I really need my money, can I get it?”

I hope these personal finance basics regarding convenience, high interest savings and liquidity will help you get your emergency fund up and running. We go into further detail in our ebook. Check our resource link for free budget spreadsheets and other financial calculators to help you on your way. The most important tip is to get it started. Even if you earned a 0% rate of return, you’ll still have money set aside for those unexpected expenses that you wouldn’t have otherwise.

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Filed under: Personal Finance

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