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How Much Should You Put in an Emergency Savings Fund?
Most financial experts suggest that you have 3-8 months of monthly living expenses in an emergency savings account (fund). So, if your monthly expenses are $2500, then you would need to have $7500 to cover 3 months of your normal living expenses. If at all possible, we suggest that you try to put aside 8 months as it can easily take 6-12 months to find a new job if you were to lose your current job. Obviously, the more savings you can put aside, the better. Truth be told, we actually feel 12 months is ideal and would allow you to be more selective in a job hunt if you were to lose your job.
It's very important to put your emergency funds in an account that is very safe, that you can easily set up and that is easily accessible (which is called "liquid" in the banking world). So, putting your money in the stock market is not a good idea as you might lose your money and it would not be easily accessible. We suggest an online high yielding savings account, which are safe (FDIC insured) and typically pay 16 times what a normal bank savings account pays (in terms of the interest you will earn with your money).
See above for a list of some of the best high yield online accounts and click on the link for more info. You can easily set up an account online in just minutes and don't have to close your existing bank account.
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It is easy to review savings and deposit account options. Compare current rates and terms on savings, CDs, money market or interest-bearing checking accounts in the table above.
INSTRUCTIONS: Check out different options by changing the account type and amount and then clicking the Update Results button. Please note that not all combinations on the table below will have offers listed.
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Whether you are saving for a home remodel, a down payment for a major purchase such as a home or car, retirement, or some other goal, a savings or money market account may have a place in your financial plan. Deciding which account or type of account works best for your situation is a matter of evaluating your money access needs for the short-term and up to seven years from now, comparing your options and choosing the account that best fits your needs. | |