You’ll want to make wise choices about what to do with your savings.
- When saving money for emergencies, you should consider keeping it in a high-yield savings account.
- You can earn more interest by choosing a high yield account.
- You can also more easily track your progress towards your savings goals.
Saving money for emergencies is extremely important for building financial security. Without emergency funds, you might end up turning to credit cards or other types of debt when surprise expenses spike.
You’ll want to make sure you have enough money in your emergency fund to prepare for the unexpected. Ideally, this means you’ve saved three to six months of living expenses. But you’ll also want to make sure you’re putting your savings in the right account.
For most people, a high-yield savings account is the best place to find emergency cash. Here are four reasons.
If you have the recommended three to six months of living expenses in your emergency fund, that means you’ve invested several thousand dollars. With so much money in your account, the interest rate paid to you on your balance can make a big difference.
Most checking accounts and traditional savings accounts pay little or no interest, so your money will simply stay in the account, losing ground due to inflation. If you opt for a high-yield savings account, you’ll maximize the money your emergency savings earn while it waits for you to use it. These extra funds you receive from your savings account can help you increase the amount you have invested for unexpected expenses.
2. To keep money separate from your bank account
You don’t want your emergency savings to be in your regular checking account, because it’s important to keep this money separate. Otherwise, you might end up inadvertently spending it for reasons other than emergencies. It could be a huge financial disaster if the money has been wasted on daily expenses and you don’t have it available when you need it.
If the money is in a separate high-yield savings account, you’ll know it’s for emergencies and you’ll be less likely to use it for other things.
3. To facilitate tracking of funds
Keeping your money in a separate high-yield savings account allows you to easily track the exact amount you have invested for emergencies at any time. This can be especially helpful when you’re working on building your emergency fund.
If you’re still saving several months of living expenses, you can also set up automated money transfers to your emergency fund account each month. You can track your progress as the fund grows to ensure you’re on track to save the recommended amount as soon as possible.
4. To ensure you can access your emergency savings when you need them
Finally, you’ll want to opt for a high-yield savings account for your emergency fund, rather than investing it in other assets such as stocks, bonds or CDs, because then your money is accessible when You need it. You won’t risk incurring losses or having to sell investments at the inconvenient time, and you’ll have quick and easy access to your emergency money when unexpected expenses arise.
For all these reasons, you should seriously consider opening a high-yield savings account for your emergency money as soon as possible if you don’t already have one.
These savings accounts are FDIC insured and can earn you 8 times your bank
Many people miss out on guaranteed returns because their money languishes in a big bank savings account earning almost no interest. Ascent’s picks of the best online savings accounts can earn you more than 8 times the national savings account average rate.