Banking Your Emergency Fund

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Emergency Fund Saved

The jars and boxes are stuffed.

Roll those coins.

Your bank will expect you to bring your coins wrapped or will charge you a fee to “spin” them. They have a machine which counts and sorts coins, but often charge customers to wrap the coins. Save the fee by doing it yourself. The bank will weigh them to be sure you counted correctly.

Choose an account.

Your bank will give you a handful of pamphlets to choose the right account for yourself. Take the time to read about the accounts available online at your bank and others.

  • Traditional Savings
  • Seasonal Savings
  • Money Management
  • High Yield Savings
  • Online Savings

Traditional Savings

These accounts are the typical, vanilla savings accounts. The interest will be low (usually less than 0.1% APY).  The advantage to this account is the low minimum balance to open or maintain the account. Many banks open this account with as little as $100. Some offer even smaller opening minimums if you link your checking account with an automatic savings draft each month.

Seasonal Savings

This is the old “Christmas Club” account. The opening balance will be tiny. The interest will also be tiny (if any) because the bank assumes you will be withdrawing the money shortly. If you have emergencies often, this account may be right for you, as most savings accounts incur maintenance fees when you take money out too often.

Money Management

With a larger minimum opening deposit and a higher maintained deposit, this account will net you around twice as much interest as the traditional savings account. Monthly transactions will be limited to avoid fees. Be sure to ask if deposits count toward monthly transactions, since you already know withdrawals do.

High Yield Savings

Interest rates on these accounts can be as high as 0.5%, but they require as much as $25,000 minimum maintained balance to pay that yield. Check with your bank. Most have graduated interest rates based on the minimum balance you carry in the account.

Online Savings

By saving the expense of a brick and mortar with tellers and bank managers, these FDIC insured banks are offering up to 0.90% interest on savings accounts. The highest of the high yield accounts, online savings has gained popularity over the last few years. Opening minimums vary as widely as interest rates.

Shop Around

Before you assume the bank where your checking account is now is the best one for your savings account, check out the competition, especially the online competition. Interest is important, but so is access to your money.

If you feel like you will be tempted to withdraw your money before emergency strikes, choose an account which does not offer checks and turn down a debit card (or let your spouse hide it). If you physically have to walk into the bank branch during banker’s hours to retrieve your money, you will be more likely to leave it where it is working for you.

Next, we look at withdrawing and growing your emergency funds.

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See all posts in the Emergency Funds Series.

(c) Ann Marie Dwyer 2011
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  1. Building Your Emergency Fund: Part III | Momma's Money Matters

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