Question: I want to create an "emergency fund" -- should I put the money into a high interest savings account, a CD...?

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Answer #1:

Season 13 / Episode 3: - Margaritaville

Bank Clerk: How can I help you, young man?
Stan Marsh: I got a hundred-dollar check from my grandma and my dad said I need to put it in the bank so it can grow over the years.
Bank Clerk: Well that's fantastic. A really smart decision, young man. We can put that check in a money market mutual fund, then we'll re-invest the earnings into foreign currency accounts with compounding interest aaaand it's gone.

Stan Marsh: Uh... what?
Bank Clerk: It's gone, it's all gone.
Stan Marsh: What's all gone?
Bank Clerk: The money in your account. It didn't do too well, it's gone.
Stan Marsh: What do you mean? I-I have a hundred dollars!
Bank Clerk: Not any more, you don't. [Gestures] Poof!
Stan Marsh: Well what can I do to get back my...
Bank Clerk: [Interrupts] I'm sorry, sir, but this line is for bank members only.
Stan Marsh: I just opened an account!
Bank Clerk: Do you have any money invested with this bank?
Stan Marsh: No, you just lost it all!
Bank Clerk: Then please stand aside for people who actually have money with us. Next please!

Answer #2:

emergency funds should be in something that you can cash out quickly without losing much or any of your original investment

if your engine is going to go soon, just keep the money where it is - you won;t make any money short-term investing it anywhere - most cars should easily last 150-200,000 miles anymore they say - regular oil changes are teh cheapest way to help assure that

look online for ING savings accounts - they might still be running a special where, with a minimum of $250 deposit, they will give you a $25 bonus right away (you can't touch that money for 30 days, and then they also pay about 1% a yr right now - that's better than a regular bank acct - that might pay 0.2% and your money won;t be tied up in a bank CD that will cost you a penalty if you cash it in early

my 17 yr old son worked at my company this summer and I put $250 of his money into an ING acct for him - he got the $25 bonus right away - that's 10% income!

Answer #3:

Great Idea! I know adults who don't even have an emergency fund. But the fact of the matter is it's called and emergency fund so you can access it immediately without penalty if you need the money. The only two suggestions I could make that are risk free and without penalty are a high interest checking or savings account or a money market account. These typically yield 1.5 to 3% of your money but allow you quick easy access in an emergency and have no risk. Early withdraw of CD is high penalty, using the stock market is VERY HIGH RISK. Bottom put a little more money in each week and forget about it in a few years you will have more then enough to cover the cost of an engine. Which by the way is around $3,000 to $5000 installed.

Answer #4:

if you want your money to compound while you have easy access to it, the best blend is a savings account. A CD will barely give you 4%....and if that's considered high, then unless you're talking about thousands upon thousands of dollars, the interest rate really will do nothing for you.

Even 4% on 1,000 is only $40. You made $40 by letting a bank play with your money for a year and restrict you from using it. I think you could figure out a way to generate that $40 by not frittering it away on whatever things you like to blow your money on (we all have them. I fiend for pop)

With a small amount of money, the key is accessibility because there is no passive way that's going to make you rich off that $500. the only way to really turn that $500 into a whole lot more is to put in work.





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