Emergency Fund Options

I use capital one 360 checking & savings. Direct deposit, and you can take pictures of checks for deposits. If you want to deposit cash you will have to keep a local bank account and transfer it in. ATM withdrawals are free.

I hear Ally bank is good too. I just went with capital One.

Look at Ally, Discover, or AMEX. You can get a rate around .80% or better in your savings.

I might be one of the few that doesn't like the emergency fund to be liquid due to the opportunity costs....


Conservative investments, sure....but not liquid.

The main risk is if you need it shortly after starting it.

However after that, even on a downturn you'll still be able to bring out at least the value of your principal.

Money market accts - check with State Farm bank. They give you whopping .3 for under 10k. That's terrible, but one of the best out there.

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Just stash the money in a Roth IRA. You can pull your contributions back out anytime you like without a penalty. In the meantime any investment gains are tax-free.

It makes no financial sense to stock up an emergency fund savings account with limited investment options when you can put it in a Roth instead. The only time a dedicated savings account makes sense is if you are maxing your Roth - and if you're doing that you probably don't need an extra emergency stash much anyway.

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I'm starting to get the feeling that I need to move a large chunk of cash into a personal investing account. I've already maxed the Roth IRA for the year and I've got plenty left in checking.

I wanted to build some level of a security blanket before getting more exposed to the market and I think I have reached that point. You bring up a great point about the principal in a Roth IRA.

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Just stash the money in a Roth IRA. You can pull your contributions back out anytime you like without a penalty. In the meantime any investment gains are tax-free.

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Caveat is you have to have had the Roth for 5 years to take the contributions out tax free.


Another key difference is the IRA cannot be a joint account. If you are married and you want both of you to have access to the entire emergency fund - IRA's won't work.

I already max my Roth every year. I am going to go with cap one 360 for a cushion so I wouldn't lose the compounding value of maxing the Roth out year after year that would be lost by pulling out principal.

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And don't take my word for this - but I'm pretty sure the contribution maximum is a net max - so if you, say, take out 5k to meet an emergency expense, you can put 5k + the max contribution into the account before the end of the tax year.

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That's a negative, Ghostrider.

Now if you contributed 5k for the current year, withdraw that, you still have till April 15th of the following year to put it back.

But after April 15 rolls past, contributions become locked. You can't put it back in addition to your yearly allowed contributions.

I would use the Roth ONLY for an emergency fund to use in the event of job loss....the money reserves to give you a little piece of mind as you look for work....and time to consider options rather than accept the first offer.


I would have cash reserves separate for more immediate emergencies.

Personally, I keep 2 weeks worth of pay liquid.

If I need more, I use credit cards to bridge the gap between that and liquidation/transfer of an intermediate bond ETF (that is kept in a taxable brokerage account) to my bank accounts.

JMHO.

But why would you take money out of your retirement? (Roth) I thought retirement money should not be touched