Where To Stash Your Rainy Day Fund

Everybody needs emergency cash reserves for the unpleasant day when your expenses unexpectedly exceed your income. By stashing your reserves in the right place, you should ideally be able to fund your life – rent, food, transportation, utilities, and any other fixed expenses – for at least three months. The Washington Post has a few tips to keep inflation from eroding the value of your pot of emergency cash.

The goal is to balance the need for precious liquidity with a need for steady growth. Consider using the following:

  • High Interest Saving Accounts: Our personal favorite, these accounts allow you to keep your money completely liquid while providing a risk-free APY that usually exceeds 4%. The accounts usually limit you to no more than 6 transactions per month.
  • CDs: Higher rates can be found with long-term CDs, but penalty fees can undermine liquidity, which makes them less than ideal for rainy day funds. To get around the limits, you can ladder your CDs so the funds become available at regular, staggered intervals.
  • Money-Market Accounts: Traditional money-market accounts are usually constrained by fees and minimums, but money-market mutual funds can provide a slightly high rate of return for the more adventurous – just watch out for fees.

Where do you stash your reserve cash? Tell us in the comments.

Where to Stash Your Emergency Cash [Washington Post]
(Photo: 4ever30something)