Where I Keep My Emergency Fund Cash – January 2011

The results of my Emergency Fund survey are in, and appears that there are a lot of big savers out there! 28% of respondents had cash reserves of over 12 months of expenses, and 24% of you had the more-often recommended 4-6 months of expenses.

With such sizable cash reserves, where you do guys put it all? I figured I’d share my stash-the-cash choices, which may not be perfectly optimal but I’m open to talking about it. The size of the circles are proportional to how much of my money I keep in each respective account.

With interest rates so low across the board and still dropping it seams, it’s been hard to get really excited about many new options. But remember, it can be better to be earning 2% with low inflation than 5% interest in a high inflation environment. Every basis point helps.

Rewards Checking Accounts

You’ve likely heard of these by now. Usually through local credit unions, these checking accounts pay a higher interest rate if you jump through some hoops each month. However, if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. More coverage here.

One nationally-open example is DanversBank, which offers their Free Rewards Checking currently paying 3.01% APY on balances up to $25,000, provided you satisfy the following each month:

* perform at least 12 debit card transactions (excluding ATMs);
* receive their monthly statement electronically;
* access Online Banking, and
* sign up for direct deposit or receive a recurring ACH transfer

To find a local rewards checking account limited to your area, check out DepositAccounts and use the filters. Sadly, my local account recently dropped their rate significantly.

Long-Term CDs – Ally Bank

If you have a large cushion, it’s quite possible (if you’re lucky) to not have to touch it for years or more. Therefore, I think it’s okay to put some of it in safe investments but slightly less liquid.

With the Ally Bank certificates of deposit, you can still access your money as long as you pay a early withdrawal penalty of 60 days interest. That’s significantly less than at other banks. I have a 5-year CD paying 3% APY, but the current rate for new deposits is 1.60% APY for a 5-year CD (as of 10/25/13).

Rates change constantly, but let’s assume you have a certificate of deposit from any bank paying 2.39% APY with an early withdrawal penalty of the last 60 days of interest. (2.39% APY ~= 2.26% rate compounded daily.) Here’s how your actual annualized interest rate would fluctuate given your holding period.

After just 6 months, you’ll already be earning 1.58%, more than a comparable 12-month CD. If you somehow had to withdraw after 1 year, you’d still have earned 1.99% APY. Basically, after just 6 months I have nothing to lose and a lot to gain, so I keep a sizable chunk here.

Savings Bonds

I have some older Series I Savings Bonds, but they aren’t a very good buy right now. The total rate consists of a fixed rate and a variable rate that adjusts with inflation every 6 months. If you bought a bond now, you’d get a 0% fixed rate and only 0.74% from inflation. However, my older bonds have higher fixed rates, and according to my TreasuryDirect statement they are earning 1.74%, 2.25%, and 2.75% right now. The annual purchase limit is now $5,000 in paper I-bonds and $5,000 in online I-bonds per Social Security Number. I’ll keep them for a while, as I like the tax deferral benefits and inflation may come back to bite us.

Online Savings Accounts

Rewards checking account and savings bonds have deposit limits, and you only want to lock up a certain amount in longer-term CDs, so the rest goes into the now-popular online savings account. There are a lot of players out there now, but many of them are packed together with very similar features and interest rates.

Right now the rest of my cash is over at SmartyPig.com, an FDIC-Insured bank account that lets you save for specific goals like an online piggy bank. However, they’ve added so much flexibility that you can pretty much use them like any other savings account. Their rate has dropped recently from 1.75% APY to 1.35% APY for balances up to $50,000. This is still amongst the top rates, but I’ll be watching them closely.

Alternatively, Everbank has their Yield Pledge Money Market paying 1.10% APY for the first 6 months for new accounts. This rate is higher than any 6-month certificates of deposit currently available, while still being available for withdrawals at any time. The rate is guaranteed stay in the top 5% of competitive accounts. Evantage Bank has their Mega Money Market account paying 1.75% APY for balances up to $35k. Most other banks are clustered around the 1% to 1.2% mark.

So… where’s your cash?


  1. Jeff Davis Bank and Trust, 4.01% APY for balances up to $15,000.

    Signed up online (never even visited the state where they reside), works great. Typical rewards checking account requirements.

  2. Just about all in savings bonds. Mostly I-bonds at 1.6% above inflation (purchased in 2003), and all beyond the five-year mark, so there will be no penalty for using them early.

    If no emergency happens by the time I manage to spawn and the kid needs to go to college, then maybe I’ll break into the savings bonds for the tax-free use for education.

  3. Spread evenly between cash, short term bond fund, long term ttreasury bonds, gold, and a total-market stock fund (essentially a Permanent Portfolio model). I can’t stand to watch my money just sitting there. I’m getting around 8% annual growth, and happy with how the portfolio performs in all of the various market trends we’ve seen over the past 3 years.

  4. GetOutOfDebtGuy says:

    I’ve been impressed with the rates of return with my test account at Betterment.com

    Take a look.

  5. Total about 20 months of expense. I may reduce it if the economy is better & I feel more confident.
    60% in Penfed’s 3-yr CDs @5%. Not sure where to move when they will be matured later this year.
    20% in savings account at company’s credit union @1.76% APY
    20% in Vanguard short term investment grade fund.

  6. Money Beagle says:

    The dedicated emergency fund is good for about three months worth. That’s split between ING Direct and Ally Demand Notes (which pays a higher rate than any money market but is unsecured so there’s risk). After that I’d have to tap into the investment accounts which are unallocated for any specific purpose and would last us at least a year.

  7. Vanguard Energy ETF – 1yr 21.13%
    HSBC Direct – .90%

  8. I have been using evantage bank 3.75%, regular high-yield requirements (10 card transactions, bla bla bla). They only have that rate up $10K though, so I may have to sign up for JD bank. Thanks Mr. Plainfield. I see BBB gives them an A+ rating!

  9. cynical investor says:

    ING Direct (not so long ago I would put almost everything in the stock market, what a folly, cash is king)

  10. Hi Jonathan – I am also a huge “saver” – we have ~$200k in regular savings, then another ~$100k in “cash” accts at Schwab/Fidelity. My question is this, though, I put $30k in an Ally 5 year CD acct. I am confident that it worked, but I do not receive monthly statements from them, nor does interest seem to be accruing. I track all accts using mint.com and the Ally acct just sits there at $30k. Is there a trick to what they’re doing? Paying interest only at the end of 5 years?? Thanks again! Jessica

  11. I’m giving more and more thought to dumping a sizable chunk of my emergency fund into my Roth IRA. Seeing as though you can pull out your contributions at any point tax free it seems like the potential is there to earn more by investing, although you don’t see it until retirement. But 1.75% at EVantage bank is the best I can get? What does everyone else think about emergency funds into your Roth?

  12. JessicaD – the interest accrues but it’s not added to your CD balance until the end of the term. If you log into your Ally account you should see your CD there – it will show the accrued interest in one column and the balance (which right now would still only be your original $30K) in the next column. That’s probably why your account isn’t updating in mint, because the interest isn’t available yet in the balance of the CD.

  13. Ally CD’s I believe have two options to pay interest back. I think by default they pay the interest back into their CD’s annually. Mine is payed back monthly and there is a single deposit of that interest. If you just opened the account you won’t see that deposit until approximately 30 days after your funding deposit. You can call them and verify the interest deposit period.

  14. Forgot to mention if you’re not getting the interest deposited monthly, I believe they can change it.

  15. In the past I have kept much in high-yielding CDs (and had a 5.5%+ CD long after interest rates tanked). BUT, these days, I have money at Ally, Alliant CU, and some MMMFs (earning about 0% there). To me the returns are not the important part – the liquidity is. I view the current state of interest rates as a short-term problem. Ally and Alliant have the easiest/highest interest rates at the moment (better than most everywhere else – without hoops to jump through).

    I have about a solid 3 months’ expenses at the moment and for the long term prefer about 12 months. If I had 12 months’ right now, I’d probably have an Ally CD or be chasing rates a little more aggressively. Or I may feel a little more open to risk for the second 6 months, for example (bonds?).

  16. AmericaNet Bank has 3.75% checking, with 10 ATM transactions, and a $10k limit, and a 1.75% savings, with limit at $35k.

  17. JessicaD – Courtney mentioned checking your Ally account directly to verify that Ally is applying interest.

    Also, keep in mind that Mint.com has numerous and on-going issues with its investment tracking feature (just go into the discussion forums and read about all the unresolved issues). I like Mint.com for tracking spending and bank accounts, where (for us) it has been accurate for the past two years. But for tracking investments I would never recommend it – the software is just too buggy.

  18. Thanks Courtney, Roger, and Ron! I will check the ally acct online to confirm that I indeed have accrued interest. And Ron, thank you for the heads up on the mint’s deficiencies with investment tracking. I also have mainly used it for transaction tracking (spending/deposits) and will take the investment tracking with a grain of salt. Thanks again everyone! (This post also has inspired me to do something, anything with our ~3 years of expenses sitting in cash! A little something (ally for all of it?) is better than nothing (thanks BofA!).)

  19. Ally takes the cake, especially the no penalty CD. i have over 12 months’ reserves in Ally CDs.

  20. Andrea P. says:

    40% of EF at Vanguard’s Tax-exempt money market fund

    60% of EF in an on-line account that provides checking.

  21. We’ve got about eight months of EF (not counting non-retirement brokerage accounts in EF):

    50% in credit union incentive checking (2.5% return, $50k max across two accounts; requires 12 ATM transactions/month, online statements per account)

    40% in Vanguard MM

    10% in CDs (small interest-loss penalty if cashed out early)

  22. Ing Direct.
    I have some other cash accounts, and older Savings Bonds,
    both “I” and “non-I”, but those I classify as part of my long-term
    retirement savings.

  23. christine says:

    Any one use EverBank at 2.61% for 5 mo cd?

  24. its 5 year not 5 month

  25. sorry… typo!

  26. Well, that’s a toughie. I need to have *some* access to my cash for taxes in April (prop and income). So, Schwab – please don’t laugh – High Yield Savings at a whoppin’ .4%. That’s not a typo.

    I looked at asset allocation today and I have over 40% in cash – oops. I need to re-balance to fit my model. Time to get cracking on those ETF ideas.


  27. Anyone else notice Evantage has a $5 monthly fee? At .4% better than smartypig, you need at least $15k in there before you break even on that

  28. Lewis,

    Evantage only has a $5 monthly fee if you go over 6 withdrawals in a statement cycle.

  29. How do I “max out” the interest benefit for SmartyPig, since it has a (relatively) low $50000 limit for the 1.35% APY? Do I put in the full $50000, or do I have to put in slightly less than that in order to earn interest on the interest as well? Thanks for any insights!


  1. [...] earning 1% more over time can be significant. I last shared my emergency fund breakdown in January, so here is a 2nd quarter update. The size of the circles are proportional to the balance I hold in [...]

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