Saving money for those unexpected life emergencies is crucial if you want to ensure that you and your family are taken care of and prepared for the worst. But where do keep your emergency savings? Financial advisors recommend placing your emergency funds in a bank account that yields a high-interest rate. To help you sort through all the details, we have compiled a handy list of the three best bank accounts to use for an emergency fund.
Why is Having an Emergency Fund so Critical?
Putting funds aside to cover those unavoidable emergencies is essential for a few reasons. It will not only provide you with a safety net when life throws you a curveball, but it can also save you money.
When there is no emergency fund, grabbing a credit card or borrowing may be your only option. Depending upon the amount of emergency funds needed, it could throw you into debt. You can avoid this situation by setting up an account specifically for emergencies. Furthermore, this will allow you to avoid your situation turning into a financial crisis. It’s smart financial planning at its best. If you are looking for ways to save money so you may allocate more to an emergency fund, check out these 20 money saving tips.
Why Use a Special Account for Emergency Funds?
Due to the nature of emergencies, you might need to access your emergency funds at a moment’s notice. For this reason, it wouldn’t be wise to keep your money locked away in any type of account that charges an early access penalty, such as a 401(k). It would also be a mistake to expose your emergency funds to the ups and downs of the stock market.
The best place to keep your emergency funds would be in a FDIC insured, high-yield bank account that will allow you to grow your savings over time, and access it with no penalties. We have a few excellent recommendations for emergency fund bank accounts that will help you prepare for the unavoidable and costly situations in life.
Recommended Emergency Fund Bank Accounts
We’ve narrowed down the top 3 picks for safe, convenient, high-yield emergency fund bank accounts. Additionally, we fine-tuned our search to present you with a few recommendations for the best banks to trust with your emergency funds.
1. Online High-Yield Savings Account
If you are looking for the highest interest rate that will quickly grow your savings, you will want to park your money in an online emergency fund savings account. Online bank accounts can offer incredible interest rates that are much higher than a traditional bank could ever provide. This is because online banks do not have the overhead expenses that traditional brick and mortar banks have. A high-yield savings account can come with the restriction of not being able to utilize a handy ATM card or write checks. This, however, is offset by the benefit of having such a high interest rate.
The emergency fund savings account options can vary from bank to bank. CIT Bank offers two exceptional savings accounts that would secure and quickly grow your emergency funds – Savings Builder and Premier High Yield Savings. At the time of this posting, their interest rates range from 1.55-2.45%. We also recommend a Marcus by Goldman Sachs High-Yield Savings account. Their motto is “Just don’t store money. Make money™”.
Benefits of utilizing an online savings account for your emergency funds:
- Provides amazing interest rates that traditional banks usually can’t offer
- Typically no opening or maintenance fees with online banks
- Generally offers daily compounding interest to fast-track your earnings
- FDIC insured
- Able to utilize their innovative and convenient mobile apps
2. Money Market Account
As with the high-yield savings account, placing your emergency funds in a money market account will also provide you with a high-interest rate. However, a crucial difference between the two is that money market accounts traditionally have a designated ATM card and come with check-writing abilities. This will allow for quicker access to your emergency funds. CIT Bank offers a high-interest money market account option that would be ideal for storing and growing your emergency funds.
Check out the benefits of using a money market account for your emergency savings:
- High-interest bearing account
- Easy access to your emergency funds with ATM card and checks (normally 6 transactions per statement cycle allowed)
- Generally no opening or monthly service fees
- FDIC insured
3. Take Advantage of a No-Penalty Certificate of Deposit (CD)
A CD is also secure money that is held in a bank and can yield a high-interest rate. The significant difference is that a CD would have a fixed term. You agree on a specific amount of time where an interest rate is locked in. CDs typically issue penalties when you withdraw before the maturity date. However, some banks are now offering a no-penalty CD where you can place and grow your emergency funds. Compare Marcus by Goldman Sachs and CIT Bank’s no-penalty CD to see which is right for your situation.
Find Out What a CD can do for your emergency funds:
- Offers a locked in high-interest rate for a specified amount of time
- No penalty for withdrawing emergency funds before maturity
- Normally no maintenance fees
- Typically offers daily compounding interest
- FDIC insured
Get Prepared with an Emergency Fund Bank Account Today!
Choosing the best bank account to store your emergency funds is vital! Especially if your goal is to quickly grow your savings. Select an account that will work best for you and your family based on your specific needs. We hope our summary of the best bank accounts to use for an emergency fund has set you on the path to being prepared for your next emergency!