The 3 Safest Places to Keep Your Emergency Cash

woman in a mask holding a piggy bank
Photo by Anton27 / Shutterstock.com

The coronavirus pandemic has given Americans a painful reminder that emergencies pop up when you least expect them.

The best plan for dealing with such crises is to prepare long before they arrive at your doorstep. Having money set aside in an emergency fund means one less thing to worry about when times turn tough.

But where should you stash that cash? Following is a look at three options. They are the best options for emergency savings in that they all:

  • Are insured: The Federal Deposit Insurance Corp. (FDIC) or National Credit Union Share Insurance Fund insures your money — usually up to $250,000 — in the event that your bank or credit union goes under.
  • Offer liquidity: You can withdraw your emergency savings at a moment’s notice, although a penalty fee might apply in some situations.
  • Pay interest: Don’t expect to earn much — rates are falling — but at least your money can earn something.
  • Are free of market risk: When the stock market tanks, your emergency fund will not go with it.

Certificate of deposit (CD)

When you put money in this type of savings instrument, you agree to keep it locked up for a certain length of time (often called a “CD term”).

Say you purchase a one-year CD. In exchange for agreeing to leave your money in the bank for 12 months, you generally will receive a rate of return (often called a “CD rate”) that will not change during that period.

The advantage of CDs is that they generally pay higher rates of return than the other options on this list. However, if you remove money from a CD before the CD term is up, you typically will have to pay a penalty.

Savings account

Just about everyone is familiar with a savings account. You simply open a savings account, put some money into it and then sleep well at night knowing the cash is safe.

Bank savings accounts are more liquid than CDs: You generally can withdraw money at any time without paying a penalty. But that liquidity comes at a price, as the rate of return for a savings account is usually lower than what you would get in a CD.

Additionally, you typically cannot take money from the account more than a half-dozen times each month — and your bank may charge you a fee for exceeding that limit. However, in light of the pandemic, the Federal Reserve recently enabled banks to waive that fee, as we report in “New Rule Change Makes Savings Accounts More Attractive.”

Money market account

These accounts resemble traditional savings accounts. For example, they are subject to the same six-per-month limit on certain types of withdrawals and transfers, and your bank may charge you a fee for exceeding that limit with a money market account as well — unless it chooses to waive the fee.

However, savings and money market accounts differ in some important ways.

In many cases, money market accounts pay higher interest rates than traditional savings accounts. And, unlike a savings account, you often can write checks on a money market account.

If you’re wondering why your own isn’t on this list, check out “6 Reasons Hiding Cash at Home Is a Terrible Idea.”

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
5 Simple Steps to an Awesome Retirement
5 Simple Steps to an Awesome Retirement

The path to your dream retirement begins with these five steps. How many have you already taken?

These 5 Laptops Have the Best Battery Life
These 5 Laptops Have the Best Battery Life

Need a laptop that runs as long as you do? Check out these models.

17 Home Maintenance Tasks That Save You Money
17 Home Maintenance Tasks That Save You Money

Here’s how to cut household costs and maintain your property’s value.

It’s Worth Paying More for These 7 Things
It’s Worth Paying More for These 7 Things

Sometimes, the difference in quality makes it worthwhile to open your wallet a little wider.

5 Common Medical Expenses That Medicare Won’t Pay For
5 Common Medical Expenses That Medicare Won’t Pay For

Don’t let these health care costs catch you off guard in retirement.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on these familiar purchases. Yes, even pregnancy tests

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You probably don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

8 Things That Are Free in August
8 Things That Are Free in August

As summer enters the home stretch, we’ve rounded up these sizzling freebies.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.