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Where to keep your emergency savings in 2023

Updated: Feb 23

Beware of emergencies
Beware of emergencies

Emergency expenses are unpredictable and can put a strain on your finances if you're not prepared. It's important to plan ahead and set aside funds for unexpected situations. In this article, we'll cover some important topics related to emergency expenses and how to prepare for them, including the best place to keep your emergency savings.

Before we dive into where your savings should be kept we should begin to understand how to answer some common questions regarding emergency savings.

How Much Should Emergency Expenses Be?

Emergency expenses refer to unexpected costs that you didn't plan for, such as medical bills, car repairs, and home maintenance, but not that unexpected trip to get fro-yo. To determine how much you should save for emergency expenses, consider your monthly expenses and multiply that amount by three to six (this is the typical amount financial "gurus" will suggest). This will give you a good idea of how much you should have in your emergency fund.

It's important to keep in mind that everyone's situation is different, so you may need to adjust your savings goal accordingly. Some common emergency expenses include:

  • Medical bills

  • Car repairs

  • Home repairs

  • Job loss

  • Family emergencies

What Are Unexpected Expenses Called?

Unexpected expenses are different from emergency expenses because they are not necessarily urgent, but they still require you to spend money unexpectedly. These expenses can include things like a sudden increase in utility bills, a parking ticket, or a broken appliance.

While unexpected expenses and emergency expenses are very similar and can potentially cost you the same amount, the difference is highlighted by the word "emergency". Those types of expenses are true emergencies and something that could reduce you or your family's safety if they are not paid for. To prepare for unexpected expenses, it's important to create a budget and set aside some funds for these types of costs.

What Is the 50 30 20 Rule?

The 50-30-20 rule is a budgeting strategy that suggests you spend 50% of your income on needs, 30% on wants, and 20% on savings. This can be a helpful guideline when planning for emergency expenses. By allocating a portion of your income to savings, you can build up an emergency fund that can help you cover unexpected costs.

The 20% of income that you set aside for savings should be split between savings (money set aside for unexpected expenses) and your emergency fund. I suggest you set aside 10% for savings and 10% for emergency savings.

How Much Savings Should I Have at 30?

As a general rule of thumb, financial experts suggest having the equivalent of your annual salary saved by age 30. This may seem like a lofty goal, but it's important to start saving as early as possible to take advantage of compound interest. It's also important to consider your personal financial goals and circumstances when setting savings goals.

How to Live on One Income?

Living on one income can be a challenge, but it's possible with the right planning and budgeting. Some tips for living on one income include:

  • Creating a budget and sticking to it

  • Eliminating unnecessary expenses

  • Finding ways to increase income, such as freelancing or selling items online

  • Prioritizing savings and emergency funds

Is It Normal to Have No Savings?

While it's not ideal, many people do not have any savings. This can be due to a variety of reasons, including low income, high debt, or unexpected expenses. However, not having savings can lead to financial stress and difficulty handling emergency expenses. It's important to start saving as soon as possible, even if it's just a small amount each month.

How Much Should a 30-Year-Old Have in 401k?

A 401k is a retirement savings account that can help you prepare for the future. By age 30, financial experts suggest having the equivalent of your annual salary saved in your 401k. However, this can vary depending on your retirement goals and personal circumstances. It's important to regularly contribute to your 401k and take advantage of any employer-matching contributions.

Is It Better to Pay off Loans or Save?

Paying off loans and saving are both important financial goals, but it can be difficult to prioritize one over the other. Some factors to consider when deciding include the interest rates on your loans, the amount of debt you have, and your emergency fund. In general, it's a good idea to focus on paying off high-interest debt first and then building up your emergency fund before focusing on long-term savings.

So where should I keep my emergency savings?

The best place to keep your emergency savings is in a high-yield savings account or a short-term certificate of deposit (CD) at a bank or credit union. These accounts typically have low risk and offer higher interest rates than traditional savings accounts. It is also a good idea to keep the account in a different bank or institution than your checking account so that your emergency funds are less likely to be accidentally used. Additionally, you should also consider keeping some of your emergency savings in cash at home, or in a safe place, in case of emergency when the bank is closed or inaccessible.

Pros and Cons of a High-Yield Savings Account:

Pros of a high-yield savings account include:

  1. Higher interest rates: These accounts typically offer higher interest rates than traditional savings accounts, which means your money can grow faster.

  2. Liquidity: High-yield savings accounts are easily accessible, meaning you can withdraw your money at any time without penalty.

  3. FDIC insurance: High-yield savings accounts are typically FDIC-insured, meaning your money is protected by up to $250,000 in case the bank fails.

  4. Convenience: Many high-yield savings accounts can be opened online, and can be managed online as well, making it easy to access and manage your funds.

Cons of a high-yield savings account include:

  1. Limited transactions: Some high-yield savings accounts have limits on the number of transactions you can make per month.

  2. Minimum balance requirements: Some high-yield savings accounts require you to maintain a minimum balance in order to avoid fees.

  3. Limited branches: Some online-only banks may have limited branches, which could be a problem if you prefer to bank in person.

  4. No check-writing capabilities: High-yield savings accounts typically do not come with check-writing capabilities.

It is important to consider these pros and cons and compare them to your savings goals and needs, before opening a high-yield savings account.

Pros and Cons of a Short-Term Certificate of Deposit (CD):

Pros of a short-term certificate of deposit (CD) include the following:

  1. Guaranteed return: CDs typically offer a guaranteed return on your investment, with the interest rate and maturity date set at the time of purchase.

  2. Low risk: CDs are considered a low-risk investment because they are FDIC-insured and the return is guaranteed.

  3. Forced savings: CDs have a fixed term, usually ranging from a few months to a few years, which can be a good way to save money for a specific goal or future expenses.

Cons of a short-term CD include:

  1. Limited liquidity: CDs have a fixed term, and if you withdraw your money before the maturity date, you will likely incur a penalty.

  2. Lower returns: The interest rates on CDs are typically lower than other types of investments, such as stocks or bonds.

  3. Opportunity cost: By locking your money into a CD for a fixed period, you may miss out on higher-yielding investments that become available during that time.

  4. Penalty for early withdrawal: CDs typically have a penalty for early withdrawal, which can eat into your returns if you need to access your money before the maturity date.

It is important to consider these pros and cons and compare them to your savings goals and needs, before investing in a short-term CD.

Why keep your emergency savings in a different bank:

There are several reasons why it may be beneficial to keep an emergency savings account at a different bank than your checking account:

  1. Separation of funds: Keeping your emergency savings at a different bank can help you avoid using that money for non-emergency expenses.

  2. Insurance protection: Some banks may offer additional insurance protection for savings accounts, which can provide an extra layer of security for your emergency funds.

  3. Better interest rates: Different banks may offer different interest rates for savings accounts, so shopping around may allow you to find a higher rate for your emergency savings.

  4. Diversification: Keeping your money in multiple banks may diversify your risk in case one bank fails.

  5. Accessibility: Having your emergency savings in a different bank or account can give you the peace of mind that you will still have access to your money even if you lose your debit card or get locked out of your checking account.


An emergency fund or emergency savings is critical to ensuring you can take care of yourself or your family when the worst possible situations arise. Whether you can save 1% or 20% each month, be it $1 or $1000 each month, the sooner you start the sooner you will have an amount that will help you feel safe.

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