You’ve heard me mention my maternal grandmother many times here at BSG. She’s one of my money mentors. She was widowed at 50 and was an independent woman who believed in taking care of everything (including all things financial), her way. (Stubborn is often what my mom called her).
One of the many things she taught me was to have money to fall back on, the rainy day fund, that emergency fund I talked about last week. She was the one who took me to open my very first savings account at the ripe old age of eight. She deposited money to open the account and then told me when I got money for birthdays and Christmas it should go into the account. She’d even send me pocket money with a note telling me it was to grow my nest egg.
So, where should you stash your emergency fund? I’ve always had mine in a savings account because one, the money is easy to get. You don’t want to have to wait weeks or months in an emergency situation. You never want to tie up money in something you have to sell. You never want something that you might have to pay a penalty on for withdrawing your money. You also want to think about the tax implications if you withdraw the money.
My second consideration is will I make money? Another thing my grandmother taught me was the beauty of compound interest. Always let your money work for you and not vice versa. Right now interest rates are about as low as I’ve seen them in my lifetime, but at least you earn something which my other money mentor (my dad), would refer to it, that’s much better than a kick up the you know what.
Online banks seem to have the better rates but it’s hard keeping up with each one but Bank rate as a current list to check out and here’s the link-
Some require a minimum balance which for some people offsets the higher savings rate but if you’re going to stay on track and not spend the money (unless it is the emergency situation), then that shouldn’t be a problem.