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I keep my emergency fund in a high interest savings account. I don't know what Schwab's rates are, but if you don't care about that yield and have other account
by oplav 8y ago
I keep my emergency fund in a high interest savings account. I don't know what Schwab's rates are, but if you don't care about that yield and have other accounts with Schwab, maybe the simplicity is worth it.
- halbritt 8y agoMaybe try I-bonds? Better Rates than high interest savings. The downside is that you can only invest 10k at a time and you’re illiquid for six months.
- halbritt 8y agoWhy is this getting downvoted? Current return on I-bonds is 2.52%, higher than any high-yield savings that I know of. It compounds semi-annually, tracks inflation, and there are no penalties for withdrawal. Seems perfect for an emergency fund and less hassle than a CD ladder. I'm not shilling an investment product, it's available direct from the US treasury: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
- oplav 8y agoIt's not a bad idea. I've thought about migrating to I-Bonds. I've kept it in a savings account for the liquidity, but if you are okay with having a less liquid emergency fund, go for it.
- anarazel 8y agoBecause "emergency fund" and "illiquid for six months" aren't a great combination?
- halbritt 8y agoIlliquid in the sense that it takes a few days to liquidate. One can always get back their original investment with no penalties.
- oplav 8y agoIs that correct? According to the TreasuryDirect website, you can't redeem a bond within the first year. If a bond is less than 5 years old, you pay a 3 month interest penalty. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iredeem.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
- halbritt 8y agoThat is correct. It's twelve months instead of six. I was mistaken. Generally speaking an emergency fund should be 3-6 months of income. I justified the illiquid period by moving a third of my fund into it at a time. The interest "penalty" is simply not getting back the interest accrued in the prior three months.
- leetcrew 8y agowhy not just grab some shares of a bond fund? even with the best savings accounts you are slowly burning your money.