It’s important to look at rates when you open an online savings account, and also to pay attention to any fees, other perks offered and rules concerning withdrawals. Leading high-yield accounts earn between more than 2.00% annual percentage yield (APY), depending on the size of your account and other factors.Ī number of online banks offer high-yield savings accounts. With that said, a high-yield savings account is still reasonably accessible and allows you to receive a higher interest rate than a traditional savings account. This could create a delay in receiving funds when an emergency arises. You’ll need the use of another bank account for transferring money in and out of your high-yield savings account. However, you can’t go to a brick-and-mortar bank location to withdraw funds. Almost all high-yield accounts are found at online banks. Opening a high-yield savings account to start an emergency fund makes a lot of sense. Here are some of the best options for where to keep an emergency fund. You want to have a “set it and forget it” mentality when it comes to this account. You want your emergency fund to be accessible in case you need to access it quickly-but not so convenient that you’re tempted to dip into it unnecessarily. It’s best to keep your emergency fund separate from your other bank accounts. And when you dip into it, you simply rebuild. What are your must-haves? Look at the basics, such as housing, auto, phone, insurance, groceries, credit card minimum payments and basic utilities.Īlso, do you own a home or car that continues to need repairs? Do you engage in sports or recreation that could lead to injury? Do you have pets or kids who sometimes get into mischief? Then you may want to pad the account a bit.Ī general emergency fund can cover many unexpected expenses. Those living expenses don’t include dining out, entertainment, etc. If you’re wondering about a key question-How much emergency money do I need?-most experts recommend keeping an amount to cover three to six months of living expenses, particularly in case of a job loss. If you already have a working budget, a savings account and money set aside for emergencies, you’ll have peace of mind and the ability to indulge from time to time. Having a designated fund for the unexpected can also prevent you from having to take out a high-interest loan to cover unforeseen expenses.Īn emergency fund separate from a savings account allows for better decision making when you have an unplanned item you want to purchase-it removes some of the “Should I or shouldn’t I” shopping dilemmas. Life is full of surprises, and being prepared for emergencies lets you stay in charge of your finances without affecting your budget.Įmergencies can often take a physical, mental and emotional toll, and suffering a financial impact on top of that can make the situation even more stressful. Why Is It Important To Have an Emergency Fund? The bottom line? Emergencies aren’t selective. Or emergencies could be unexpected hospital visits, home repairs, losing your job or a death in the family. If you get into a car accident, that can create an emergency need for funds. It’s not a backup cash account or vacation fund. But an emergency fund should be used only for true emergencies. The word “emergency” evokes different images depending on who you are. An emergency can be an unpredictable expense, or it can take the form of an unexpected loss of income, such as having to change jobs or not receiving a bonus you were counting on. It’s there to help you deal with the unexpected events of life. An emergency fund is money set apart from other savings.
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