Where is Your Savings/Emergency Fund Parked?
The idea that your savings/emergency fund is supposed to be in a very liquid account is an idea I hope everyone understands and practices. However, where is the best place to park your savings?
Until the credit crisis, money market funds were enjoying returns around 5%, but now are seeing their yields sink below 2%. On top of the declining return, money market funds have scared savers into believing their money is not completely safe. Because the funds in a money market fund are invested (kinda), they are not FDIC insured, so it is possible you could lose your money, although the chance has historically and should remain very slim.
I have recently moved my money out of a money market fund and into an ING Orange Savings Account. For me, I enjoy the FDIC insurance on my emergency savings, and at the current time, the return is higher than a money market fund at 2.75%. However, I would stress that savings/emergency funds are NOT investments. Try not to chase the highest rate of return all the time and especially do not lock up your savings in an investment promising a slightly higher yield.
Because ING and Sharebuilder have recently teamed up, I enjoy the Orange Account because it is linked to my Sharebuilder account, an option that can be used to increase returns on money waiting to be invested. If you’re in the market for a finding a safer place to park your emergency fund and are interested in starting an Orange account, you can get a $25 bonus if you enter the following reference code at startup: SM424/VNZZ2RR5. If this code does not work, open up any money magazine in a supermarket and you will likely find an up to date advertisement with a newer code to use.
Where do you have your savings? $
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I have about 10k in ING DIRECT that acts as our emergency savings. We’ve been working on that all year. Feels good to have that fully funded.
I also have some short term savings in FNBO Direct. As you know I’ve been saving up money with them for our baby related expenses.
Lastly, I’m fortunate to have a stock purchase plan at work that pays 15% over 6 months. Kind of like a really high paying CD since it’s not completely liquid. I fully fund this and immediately flip it to use it for other short-term savings goals. Never want to have too much company stock.