What is the best place to put one's emergency funds?

Question

I have been able to save 3 months expenses. I want to save it separately so I don't mix it or use it by mistake while using my debit card.

My bank doesn't allow a separate emergency fund account. What is the best way to save it?

Answer 1

You have to keep some in your checking account. Figure at least 1500, but probably no more than 2500. Other than an emergency, you cannot spend it. Consider that amount as your "zero balance".

The rest keep in an high interest savings account. Transfers in and out of these accounts typically take a day or two, and the interest is not that much of an improvement. You can search this link to find "the best". But consider that even if you had 20K in the account, you are only going to earn $200 per year.

So there really is not much harm keeping the entire emergency fund in a no interest account at the bank.

Answer 2

My bank doesn't allow a separate emergency fund account. What is the best way to save it?

As this needs to be safe and liquid, suggest you open a Fixed Deposit account with your Bank and deposit the money. Some Banks need you to walk into the Bank to close the Fixed Deposit early, some may have a penalty percentage if you close the Fixed Deposit early.