Many preppers have a hard time trusting banking institutions because of proven greed and negative economic impact. However, the misgivings of a few do not mean that all financial vehicles are dangerous and mistakes. There are many tools to secure your emergency fund and earn you a decent interest rate in the process, and in almost every case, these financial assets are more secure than the underside of your mattress.
High–Yield Savings Account
Most people know that the stock market is volatile and not very liquid. In an emergency, you want access to your funds without too much of a hassle. Unfortunately, while it offers potential for significant growth, the stock market does not provide a quick turn around, especially without loss.
The stock market’s faults force many to consider the safety of a standard savings account, but these accounts will not offer even a decent return on your investment. Granted, for many, an emergency fund’s purpose is not to grow money but to maintain the current value; still, if there is an opportunity to earn two percent interest rather than less than one percent APY.
High-yield accounts provide the opportunity for growth, security, and accessibility. You can find these accounts at traditional and online banks. Many online institutions may offer accounts without maintenance fees and lower deposit requirements if any.
Certificates of Deposit
Certificates of deposit or CDs are excellent options for people who do not mind leaving their emergency fund alone for a specified amount of time, 30 days to 10 years. CDs provide the opportunity to earn even more in interest than a high-yield account, but the funds are not accessible during the specified time. However, some accounts will let you terminate the CD if you pay penalties. Some people consider having a CD latter with several CDs at different maturity rates, allowing access to funds every few months.
Money Market Account
Money market accounts can offer a higher APY than high-yield accounts, but they often come with more stringent requirements. For example, you may need to start the account with a higher initial deposit. However, money market accounts also come with benefits, like debit cards and check writing privileges, which make accessing funds easier.
Roth Individual Retirement Account
Depending on your age and the account’s maturity, a Roth IRA can act as an emergency fund for qualifying withdrawals. Being as the account is a tax-advantaged vehicle, you can remove qualifying funds without paying taxes, much like savings. However, if the withdrawal does not meet specific requirements, you may face penalties.
If you are looking to maximize your earning potential, and secure your emergency funds while still maintaining some level of accessibility, consider a multi-faceted approach. Store part of your emergency funds in high-yield accounts and CDs, and also contribute to your IRA. Using multiple vehicles can maximize earning potential and ensure you always have money when you need it.
While it can be challenging to trust the financial industry, using the tools discussed is an excellent way to ensure your emergency funds are always accessible. How do you feel about the banking industry, and where do you stash your emergency funds? Leave a comment and keep the dialogue going.