Having some savings can help you get through life’s rainy days. Whether it’s an unplanned visit to the doctor or a necessary home repair, an emergency fund can cover the cost. If you’re ready to prepare for unexpected expenses, you need to know where to keep your money. There are better options than sticking it under your mattress. Here are some of the best places to keep your emergency fund.
1. High-yield savings account
Many people keep their money in a savings account for its accessibility. However, according to the Federal Deposit Insurance Corporation, or FDIC, the average interest rate on a savings account is about 0.09 percent.
Your emergency fund might not be an investment, but it’s better to secure it where it can earn as much interest as possible. Opening a high-yield account makes a lot of sense. This is usually found at online banks. Look at rates when you open one and pay attention to any fees, other perks, and rules of concerning withdrawals.
2. Certificate of deposit
This is another possibility for your emergency fund. Certificates of Deposit (CDs) require you to keep your money in the account for a certain period. In exchange, you get a guaranteed rate of return. This can last for as short as a month or as long as five years. Since it’s impossible to predict an emergency, don’t put all your money in a CD unless there are no early-withdrawal penalties. Consider creating a CD ladder, where you buy multiple CDs with different maturity dates.
3. Money market account
You can also earn interest on your deposit using a money market account. This account sometimes comes with the debit card and check-writing benefits of a checking account, making it easy to pay for sudden expenses. Money market accounts typically require a larger minimum deposit to open an account. You might have to maintain a higher balance to earn the higher rate. Depending on how much you plan to save, this account could be the solution you’re looking for.
4. Treasury bills
Consider purchasing Treasury bills, also known as T-bills. These are short-term obligations of the U.S. government. Generally, you can buy them for less than face value and then sell them at face value when they mature. You earn interest from the difference between the amount you paid for them and the amount they reach maturity.
Unlike money you keep in savings, CD, or money market, Treasury bills are not protected by the FDIC. Instead, they are backed by the full faith and credit of the US government. Certain T-bills are auctioned weekly and are available in increments of $100. You can buy them through TreasuryDirect, banks, or a broker.
Build Your Fund By Selling Unused Items
Once you have decided on where to keep your money, you’ll have to start building your emergency fund. If you have designer bags, watches, or jewelry, find a reputable buyer to sell them to. Biltmore Loan and Jewelry is one of the most trusted outright buyers of high-end assets in Arizona. Check their competitive rates to earn more from your items.
It’s important to place your rainy-day savings in low-risk accounts. Avoid high-risk investments like the stock market so you don’t jeopardize your hard-earned money and be able to use it when you need it. Having an emergency fund can help you cover for unforeseen expenses and preserve your financial health.