An emergency fund is a basic financial tool that everyone should have. You can use this tool to pay for surprise expenses that have the potential to disrupt your monthly budget and throw your personal finances into disarray.
Now that you know why you should have an emergency fund, you might be wondering where you should store it.
Skip the Glass Jar
Do you store your emergency savings in a glass jar on top of your fridge? Is it in an envelope tucked inside a desk drawer? Both of these storage options aren’t ideal. Why?
These options don’t offer much security. Someone could grab the jar or envelope full of cash and steal it. You may not be able to prove who took the money, and you certainly can’t trace the bills to figure out where they spent it.
Too Much Accessibility:
A glass jar or paper envelope won’t protect your savings from you. You’ll be tempted to go to the jar or envelope whenever you need some extra cash. This will make it all too easy to sabotage your savings goals.
Use Your Bank
Instead of keeping your emergency savings in cash at home, move those savings into a bank account.
Ideally, you should move the savings into an individual savings account. Don’t share your emergency fund with any other savings, like savings that you’re collecting for a summer vacation. Keeping your emergency fund completely separate will prevent you from making any unnecessary withdrawals and undermining your savings goals.
Why is a savings account a better storage space? It offers more protection than jars or envelopes. Your bank account will have strong passwords and security questions that can keep potential criminals away.
Even if someone steals your bank card, you can call your bank to lock your account. Then, they can issue you a new card, and you can set up brand-new passwords to regain access to your accounts.
The Federal Trade Commission states that if you report your bank card as stolen before any unauthorized charges are made, you are not responsible for covering any payments made after the report. If you make your report within two days of those unauthorized purchases, you are only liable for a maximum of $50.
Harder to Sabotage:
Another benefit of a savings account is it keeps your savings out of your direct vision. You won’t be as tempted to withdraw from those savings for non-emergencies because they’ll be out of sight and mind.
High-Yield Savings Accounts
A general rule of thumb for emergency funds is to try to save up to six months’ worth of your income. That’s a significant savings goal. If you want to help yourself reach that savings goal faster, you should consider moving your emergency fund from a standard savings account into a high-yield savings account. It will help your account grow with interest.
What If You Don’t Have an Emergency Fund?
If you don’t have an emergency fund and you don’t have enough savings to cover an urgent expense, you could consider applying for an online loan as a solution.
Before filling out an online loan application, check to see whether it’s available in your home state. You’ll want to be sure that it’s accessible in your location. For instance, you’ll want to look into online loans in Arizona when you live in Phoenix or Scottsdale. That way, you can be sure that the option is accessible to Arizona.
Follow these tips for storing your emergency fund. The right spot will keep it safe, secure and full of savings.