Best (And Worst) Places To Keep An Emergency Fund

By Zach Buchenau

Last Updated: February 4, 2021

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the best (and worst) places to keep an emergency fund | Be The Budget

Are you wondering where to keep your emergency fund?

I’ve been in your exact position. And seriously, it can get a little overwhelming trying to decide between all the different options. But here’s the thing, it doesn’t have to be as complicated as it might seem.

In fact, there are only a couple options that you should even consider when looking for a place to keep your emergency fund. And what’s even more important, there are quite a few places you should definitely avoid.

And that’s exactly why I decided to write this post. In the rest of this guide, I am going to lay out the best places to keep your emergency fund, and then dive into a few options that you should avoid at all costs.

So, if you’re tired of the overwhelm, and looking for a little clarity on this very important subject, stick with me. This post is for you.

Let’s get to it!

Where to keep your emergency fund? | Be The Budget

Best Places To Keep Your Emergency Fund

Building and maintaining an emergency fund is one of the most important things you can do for your financial well-being. It provides you with stability, peace of mind in uncertain times, and protection from unexpected financial expenses.

Put simply, an emergency fund is designed to serve a very specific purpose: protect your finances in the event that something goes wrong.

And because of that, it is important to put your emergency fund in a place that meets 3 basic requirements:

  • Liquidity – Since the entire point of an emergency fund, is to pay for unexpected expenses, your money needs to be easily accessible in the form of cash or check. Think of it this way, if your car broke down next saturday morning, your emergency savings should be in a place that allows you to pay cash for the repairs that same afternoon. If your emergency fund doesn’t allow that kind of access to your cash, then you should look for a different place to keep the money.
  • Earns Interest – If you have the opportunity to put your money into an account that earns interest, then why wouldn’t you? I mean, money is money. And even if you only earn a few bucks each month, it’s nice to see your money grow. Depending on the size of your emergency fund, over time, this could add to hundreds, or even thousands of dollars of interest that you wouldn’t have otherwise earned.
  • No Fees – If you are going to put your money into an account and let it sit for years and years, the last thing you want is for banking fees to slowly chip away at your hard earned money. Think about it like this, if your bank charges you a $15 monthly maintenance fee, you will be losing $180 per year. 10 years of that, and you’ll have lost $1,800. Ouch. Avoid fees like the plague.

So, what kinds of accounts meet these 3 requirements? I’m glad you asked. What follows are the 2 best places to keep your emergency fund.

High-Yield Savings Account

If you’re looking for a great place to keep an emergency fund, a high-yield savings account is one of the best. That said, you need to be careful where you open an account.


First of all, as far as I can tell, there’s no real definition of what high-yield means in the banking world. For one bank, it might mean that you earn .01% interest, while for another bank, it might mean that you earn 1.5% interest. It really just depends on the bank.

Side note: if I’m being completely honest, even an account that earns 1.5% interest isn’t really what I would call, “high-yield”. I mean, if you’re looking to get a great return on your money, there are much better options. However, if you remember, there are 3 requirements that an emergency fund needs to meet. So, while you could earn more money through other investment vehicles, like mutual funds, you would sacrifice liquidity. Which is a big fat no-no!

Back to my original point, when opening a high-yield savings account, you should look for an account that earns a solid interest rate.

Finally, if you’re going to put your emergency fund in a high-yield savings account, you should look for an account that offers no-fees.

Not all savings accounts meet the 3 requirements, but there are plenty of options out there that do. So, just read the fine print and do your research.

Recommended High Yield Savings Account: Here at Be The Budget, we recommend an Axos High-Yield Savings Account. It meets all three of the aforementioned emergency fund requirements, and offers an above-average interest rate. You can also request a free ATM card, which allows you easy access to your money in the event of an actual emergency. For those reasons, the Axos High Yield Savings is a great choice for your emergency fund.

Money Market Account

The other great option for an emergency fund is a money market account. Similar to a good high-yield savings account, money market accounts allow you to earn a decent interest rate. Though, in terms of liquidity, money market accounts have a slight edge over savings accounts, in that many of them actually allow you to write checks, or spend money directly from your account.

This is a wonderful benefit if you need to access the money quickly, but it does require you to have a little bit more self-control. Since you could just write yourself a check, and mobile deposit it into your checking account, the slightly lower level of restriction can actually be a negative for people with a tendency to dip into their savings.

Recommended Money Market Account: If you think a Money Market account is where you’d like to keep your emergency fund, we recommend opening a CIT Money Market account. It meets all the requirements for an emergency fund, and also offers a great interest rate. Though this account doesn’t allow you to write checks, it does offer plenty of ways to access your money, including Zelle and Paypal. To top it all off, you can set one up in about 10 minutes.

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Worst Places To Keep Your Emergency Fund

Ok, now that we’ve established the two best places to keep your emergency fund, I’d like to dive into a few places that you should avoid keeping this essential pile of money.

Now, if you’ve read any other articles out there, you’ve probably seen a couple of these listed as good options. However, since we believe that an emergency fund should, at minimum, meet the 3 previously mentioned requirements (and since we tend to be a little more selective in matters of personal finance), here are a few places we would never recommend keeping your emergency fund.

Best and worst places to keep your emergency fund | Be The Budget

Checking Account

Ok, I’m going to start with, what I assume to be, one of the most common accounts in which people keep their emergency fund: a checking account.

Now, to be clear, when it comes to managing your financial life, spending money, and budgeting, we can’t give checking accounts enough praise. In fact, we operate our entire budget from a checking account.

However, checking accounts are designed to make your money incredibly accessible; in fact, too accessible. And when talking about an emergency fund, too accessible is a recipe for disaster.

Put simply, checking accounts are designed for spending, not saving.

Also, most checking accounts don’t earn any interest, which disqualifies them from our list of best places to keep your emergency fund.

And finally, of all the places listed in this article to keep an emergency fund, a checking account is the most vulnerable to fraudulent spending. In other words, if somebody gets ahold of your debit card, or even just your debit card number, they could end up spending all your emergency fund money before you even realize anything is wrong. Now, if that were to happen, you could file a dispute with your bank and get all that money back, but in the interim, you wouldn’t have any emergency savings to help you bridge the gap. Ironic, right?

For those reasons, putting your emergency fund in a checking account is a bad idea.

CD (Certificate of Deposit)

Seeing how liquidity is an essential requirement for an emergency fund, keeping your money in a CD is a terrible option.

You see, when you set up a CD, you are agreeing to leave a specific amount of money untouched in a bank account for a set period of time. The problem with this is that it severely limits your access to the money. In fact, if you were to run into a financial emergency during that time period, you would have to take a penalty in order to pull your money out.

I don’t know about you, but the last thing I want in the middle of an emergency is to have to pay penalties for spending the money I set aside for emergencies. That doesn’t make a single bit of sense to me.

For the lack of liquidity alone, you should avoid CDs like the plague when setting up your emergency fund.

The Stock Market

There’s no doubt about it, wise investing is the key to wealth. However, your emergency fund is not meant to build wealth. Rather, it is meant to protect you in uncertain times, and provide you with a quickly accessible financial cushion in the event of an emergency.

In fact, one of the most important roles an emergency fund serves is to protect your investments.

In other words, by having a large stash of cash waiting to protect you in the event of an emergency, you will never have to pull money from your other investments in order to make ends meet.

So, while investing in the stock market is a good habit to adopt in your financial life, it is not a good place to keep your emergency fund.


For one, any money you keep in the stock market is far from liquid. In other words, you would need to sell your investments in order to access your money, which can take a long time. Not good.

And two, it comes with the risk of losing money, which kind of defeats the purpose of building an emergency fund in the first place.

At Home

If you’re the kind of person that likes to keep your money stashed in a briefcase under your bed, as cool as that sounds, please don’t do it with your emergency fund. By keeping a giant stack of cash at home, you’re putting your entire emergency fund at risk of being stolen, or getting lost.

Beyond that, if your house were to burn up in a fire (which, I probably don’t need to remind you, is a giant emergency), you would lose all that cash along with it.

Sure, cash is as liquid as money gets, but it comes with quite a bit of risk. Please, just put it in a savings account, or money market account instead. Those are significantly better options.

Random Side Note: While keeping your emergency fund at home is a bad idea, I do recommend keeping a little cash (we’re talking no more than a couple hundred bucks) on your person at all times–especially if you are traveling. I refer to this as a wallet emergency fund, and it can be a life saver in many situations.

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Final Thoughts

If you’re wondering where to keep your emergency fund, we suggest putting your money into either a high-yield savings account (we recommend an Axos High Yield Savings), or a money market account (we recommend a CIT Money Market).

Both of these accounts provide you with: 1) liquidity, 2) the ability to earn interest, and 3) no monthly maintenance/service fees.

Now, get out there and start saving for emergencies. The sooner you do, the better off your financial life will be.

Zach Buchenau

About The Author:

Zach Buchenau is a self-proclaimed personal finance nerd. When he isn't writing about budgeting, getting out of debt, making extra money, and living a frugal life, you can find him building furniture, fly fishing, or developing websites. He is the co-founder of BeTheBudget, and Chipotle's most loyal customer.

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