Comments on: Emergency Fund Account: Money Market or High Yield Savings?

By: Tim

Tim — Sun, 27 Jan 2008 00:21:54 +0000

I personally put my emergency fund in a high yield savings account with HSBC. With the federal rate cuts, I've been shopping around to ensure I'm still getting the best rates. You may want to check out this site for a comparison of many of the high yield savings accounts and their rates as of 1/26/08: http://themoneykings.com/blog/comparison_of_high_interest_savings_account_rates

By: CURTIS PEARLYMUSSEL

CURTIS PEARLYMUSSEL — Thu, 13 Dec 2007 03:53:52 +0000

What is your opinion on this? I just opened a checking account called “ultimate checking” at a local bank. It pays 6.01 interest. Again, this is just a checking account. Obviously, there are some caveats to the program. Although it is a local brick and mortar bank, and you can write checks, it is mostly an online program.
You must make 10 debitcard transactions per month. You also must have one direct deposit per billing cycle OR auto draft (easy since my work check is direct deposited). Must have valid email address. Lastly, must recieve all your statements electronically. You cannot exceed $25,000 in the account.
That is all there is to it. No fees. The only concern I have is making sure I do the 10 debits per billing cycle. Hope I can remember to do it.
What do you all think about this? Is it a good deal? I think so… You can take a look at it on thier website at bankoflittlerock.com

By: Siena

Siena — Mon, 10 Dec 2007 18:23:51 +0000

You didn’t mention banks that offer high yield online savings. I bank with Wamu (again not the greatest bank but hey, it’s free) amd I have their online 4.75% savings linked to my checking. It’s totally free with no minimums.

Even though my savings account is an online one, I can do everything with it like a normal savings. I can walk into the bank and make deposits and withdrawals, I can also bank online and tranfer money from savings into checking instantly–there is no wait to access the funds. The only online part is that the statements are done online vs. being put in the regular mail.

I also bank with Union Bank of CA and they were offering 5% in their savings for free if the balance is over 5K. Overall though, Wamu’s is better since you only need a dollar to open.

By: Kurt

Kurt — Wed, 05 Dec 2007 01:00:56 +0000

From what I can tell, the GE fund referenced above is a short-term bond fund, not a money market fund. There is a real difference between the two. Anyway, if your tax bracket is high enough, a tax-free fund is the way to go, and it doesn’t invest in crazy mortgage-backed securities (as those wouldn’t be tax-free).

By: Chief Family Officer

Chief Family Officer — Tue, 04 Dec 2007 05:14:24 +0000

The bulk of our emergency savings is now in a liquid CD at a brick and mortar bank. We are sacrificing 1.5-2% APR compared to a high-yield online savings account, but as I blogged about when I first opened the liquid CD, a big part of the equation is convenience and simplicity for my husband in case something were to happen to me. If I were single, the bulk of my emergency fund would be in an online account, no question.

By: Rich

Rich — Mon, 03 Dec 2007 21:54:08 +0000

When GE is prepared to break the buck, given their hugely deep pockets, we know there is SERIOUS trouble on the horizon. I choose to play it safe, following the advice of this blog post, and only keep my emergency fund in an FDIC-insured high-yield savings account.

To “Long Time Reader” re: the FDIC taking months or years to return the principal to the customer of a failed bank — I read in the Wall Street Journal about a week ago that in fact, the response time is more like a few days. The customers of that failed bank are able to go to any other FDIC-insured bank and open up an account there, into which the FDIC returns their funds.

http://blogs.wsj.com/marketbeat/2007/11/12/fdic-mythbusters/

By: rstlne

rstlne — Mon, 03 Dec 2007 17:46:47 +0000

I would suggest avoiding money market funds except for those that invest only in US Treasuries or US government obligations. I’ve been looking at what some money market funds hold and it is scary. Many of them are in questionable mortgage-backed securities rated Alt-A (often no-doc/low-doc mortgages) or worse. While it is true that money market fund sponsors have been pouring money into their money market funds whenever there’s trouble in order to avoid breaking the buck, GE recently broke the buck in its Asset Management money market fund. I think that’s a harbinger of more money market fund problem ahead. I have greatly reduced my holdings in money market funds this year, moving cash into treasury-only funds and FDIC-insured high-yield savings accounts where possible.

By: FinanceAndFat

FinanceAndFat — Sat, 01 Dec 2007 15:59:26 +0000

I like the ING Orange Checking for my primary emergency fund. With a debit card, you have immediate access to your money when you need it. You can also easily transfer money if you have an ‘emergency’ you can plan ahead for. I stopped using the savings account at my local bank because the interest rate was a joke.

By: Mike

Mike — Sat, 01 Dec 2007 07:11:33 +0000

State Bank of Toledo FTW! 6.01% uncapped….end of story!

By: Kurt

Kurt — Fri, 30 Nov 2007 21:56:07 +0000

Dong,
For those in non-tax states (such as Texas) the tax free federal money market account from Vanguard is an excellent choice.

By: dong

dong — Fri, 30 Nov 2007 21:35:30 +0000

I think there is one good reason for someone to hold money market fund: taxes. For high income folks in high income states being to be invest a muni money market fun can mean much higher realized return in comparison to even some of the best high yield savings accounts. Of course you need to shop around, and many times the best muni money market funds aren’t even available to most pedestrians investors – such is life for the main street investor.

By: Lord

Lord — Fri, 30 Nov 2007 21:32:47 +0000

I’m with Kurt. Make a responsible choice of MMMF and you won’t have any problem. That and pure convenience make it superior to bank accounts.

By: Tim

Tim — Fri, 30 Nov 2007 20:10:19 +0000

I have mine split among different types of accounts: laddered cd’s, MMA, and high yield savings accounts. since my cd’s are locked in and laddered they are the least liquid, but i’m not going to need all 6 months in the first month.

i am moving everything from my high yield savings at Igobanking to my USAA Asset Management Account (AMA) rather than opening up a different high yield savings account. Igobanking just lowered to 4.9% from 5.05%, and my trigger for moving was 5%. I just realized that the USAA AMA gives the current MM yield of 4.9% in addition to tiered regular interest of up to 4.5% on a certain percentage of the deposits in the AMA. don’t know how they calculate (just sent off an email), but it appears that I am gaining more by putting my liquid money there. plus i get .5% every time i use the debit card, and I have unlimited check writing.

By: Kurt

Kurt — Fri, 30 Nov 2007 19:51:12 +0000

“that’s a huge misconception”
Actually I wasn’t misconceiving anything. My comment was in response to someone saying you are an unsecured creditor in the case of your fund management firm going under (quite different from a fund losing money, I might add). If you are concerned that in such a situation the firm (or a creditor) will grab the fund’s assets, the SIPC protects you. I made no reference at all the saying the SIPC preserves the value of your investment and feel insulted you would think anything of the sort. I’m trying to help people here.

In reality, no management firm will ever let their money market funds break the buck. That is why you’ve seen people actually pump money into the funds to maintain the levels. They aren’t legally bound to, but they do it when they need to.

Look, money market funds are the best short-term holder of cash. If you are so scared about an occurrence that never has and never will happen, perhaps the mattress is the right place for your cash.

By: C. George

C. George — Fri, 30 Nov 2007 19:44:15 +0000

What kind of emergencies could you envision arising that would require large amounts of cash in less than 7 days?

I would think that those with no or low credit probably also do not have large emergency reserves.