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If you have ever experienced a sudden emergency—your car mysteriously starts smoking or you break out in a full body rash—you might know what it feels like to scramble for cash to pay for the emergency.
Most emergencies can put a sizable dent in your bank account. A survey conducted by the Federal Reserve Board found that 44% of respondents don’t have enough to cover a $400 emergency. Millennials aren’t doing much better. A 2018 Bankrate survey found that 27% of millennials have fewer than three months of expenses in savings.
If these stats are convincing you that an emergency fund is wise to have, then you might be wondering where to keep the funds. A great place to keep your rainy day fund is in a savings account that can be easily accessed. But be careful not to select your savings account like you would a pair of socks. There are a few factors you’ll want to consider to help you choose the right savings account for your emergency fund.
The interest rate works in your best interest
First, look for a good interest rate that helps you grow your emergency fund. One of the easiest ways to do this is to simply park your money in an account that has a high-interest rate. There are plenty of banks out there that pay out monthly dividends based on your total balance.
Online banks, in particular, have been touting high-interest rates recently. Aspiration offers a savings account that pays up to 2% in interest. And the best part about moving your money into a high yield savings account is that your money has a better opportunity to grow over time.
Make sure your rainy day fund is getting enough love by checking the current interest rate. The idea is that you keep shelling out money to this account over time, plus get the benefits of paid interest on top of what you put in.
It’s easy to tap, click, swipe within the dashboard
There is nothing worse than trying to build your emergency fund and not being able to access it virtually. A GOBankingRates survey found that 76% of respondents wouldn’t open a bank account that doesn’t have a mobile app. And if you incorporate an on-the-go lifestyle like most of us, you’ll want this feature.
A quick way to pick a good savings account for your emergency fund is to do a search within the app store on your phone for the bank you are considering. If there’s an app, you can check another must-have off of your savings account wishlist.
Chime focuses heavily on user experience with their app, which makes it easy to bank when you use your phone. There is also an automatic savings feature which rounds up transactions every time you spend money on their debit card. Plus, you can designate a percentage towards your emergency fund every time you get paid.
Does it have good customer service?
Did Felicia put you on hold again? No one likes to be placed on hold, especially when it comes to our personal finances. Banks who invest in good customer service are more likely to build long-lasting relationships with their customers.
Here’s what you do: Locate the customer service line of the bank with which you want to open an account. Make sure this is easy to locate, otherwise you might have difficulty with other online tasks down the road. Then, time your call and see how long it takes to connect with a live person.
If you can connect with a real person in less than three minutes, you can add the bank as a contender to handle your emergency fund. Very few people take the time to do this so kudos to you if you secret shop a new bank.
Can you easily transfer between accounts?
Building your emergency fund should be as easy as Ina Garten preparing a weeknight meal for Jeffrey. This should be simple and take very few steps. One idea to keep it straightforward is transferring money between accounts.
Double check that you can set up transfers, either manually or automatically, between your checking account and savings account. This is especially important if you are moving money between separate banks. Make note if there are any fees to transfer between banks and how long the transfer takes.
Once you figure out the transfer process, set it up once for automatic contributions. It is one of the simplest ways to stay on top of building your emergency fund. Even if you start with just $10 bucks per month. How easy is that?
These four tips can help you pick a good savings account for those days when you have a Ralphie moment (“Oh, fudge!”). The funny thing about emergency funds is that once you take the time to move them to a savings account, it’s more fun to build it up. The visual separation of having those funds in one account can help you work towards a goal amount for your fund.
Justine Nelson is the founder of Debt Free Millennials, an online community to help millennials get out of debt. Justine enjoys writing and speaking about all things personal finance. This Midwest millennial paid off $35k in student loan debt and now resides in San Diego with her husband living the DINK life (Dual Income, No Kids).
Feature Illustration: Laura Caseley For The Money Manual
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