The Changing Nature of Emergency Savings Accounts
How to Draw on Your Emergency Funds
If you encounter a situation where you need to draw on your emergency funds, the chances are that you will need access to the money right away. For this reason, emergency savings are typically kept in cash or in a traditional savings account. There is more to emergency savings than just opening a savings account. It's possible to grow your wealth at the same time as you build your emergency fund.
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A savings account is necessary because while not helping you build wealth, it still allows your money to remain safe, insured and to be completely liquid. Here are some things you will want to look for when choosing a savings account:
- 1% or Greater APY;
- Insured by the FDIC; and
- No Minimum Balance Required.
Above all, it's essential to know that any option outside of a federally insured savings account comes with some degree of risk. Even keeping cash in your home can be risky. However, all of these options are relatively low risk. That said, these options should still only be used for amounts over the minimum you would need to cover three months of average bills and necessary expenses:
- CD’s (Certificate of Deposit);
- Stocks; and
- Money Market Accounts.
How Much Do You Need in Your Emergency Fund? There are several answers to this simple question but the right solution for you depends on your specific circumstances. To start, you will need a savings account.
For more information on emergency savings and how to start an account, access the full article here.
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