You may have some “rainy-day” cash stashed away in a sock drawer or buried in a mason jar somewhere on your property, but there are far better places to store your money. In these days of direct deposit, it’s super easy to redirect a portion of your paycheck into a savings account to build up an emergency fund. But is a regular savings account the best way to go? Here are three options for your emergency fund that are both safe and profitable…
High-yield savings account: Putting your emergency fund in a high-yield savings account may be your best option among destinations for your money. Not only will it guarantee that your funds are safe and accessible, but you’ll earn interest on your deposits. Just make sure to shop around so you can find an account that doesn’t charge monthly fees and has no minimum balance.
Money market account: These accounts can offer higher yield and they’re great because you can withdraw your funds anytime. Just be picky when you’re selecting the right account for you, because there may be some fees to compare. Also, pay attention to terms like the minimum initial deposit and how often you’re allowed to make withdrawals each month.
Certificates of deposit (CDs): There are definitely pros and cons when it comes to using a CD for housing your emergency fund. One pro is possibly getting a better APY than you would with the first two options. You also get a fixed rate of return for a specific length of time, so you know earning that interest is guaranteed. The bad news there is, if you need some extra cash before the term is up, you can’t get it without paying fees. CDs have a set range that can be anywhere from a month to years, so keep that in mind before you go down this path.