Best location for emergency funds

March 10, 2015 7:41 AM

I am in the market for a new home for my emergency savings. My current bank is a joke and I need some consistency so my money doesn't become nomadic.

Obviously I want whatever it is to be liquid and insured, but the bank I'm currently using offered a great interest rate when I joined, then lowered it over the years to a little moth that flies out of your cartoon wallet. Is there any way to put this money some place with a reasonable sense that the interest will remain competitive? Transferring money like this is a PITA and I don't want to switch every year.

Also, my current bank has a terrible UI and overall experience; they basically treat me like a criminal whenever I try to do anything. As it happens, my local credit union has also become kind of crappy. So I am also in the market for an online bank with a really great site and service. If they could be the home of my savings as well, double great!

Thanks for your help.

posted by selfnoise to Work & Money (18 answers total)

Have you looked into Betterment? I'm not a super finance expert but I transferred my emergency savings into a "Safety Net" account there and it's pretty seriously outperforming my old American Express Personal Savings account. Plus, great UI.
posted by torridly at 7:49 AM on March 10, 2015

Simple has really great savings tool. Set a goal and a time period to meet the goal - it auto-deducts whatever quantity of money is needed per day to meet that goal.

The interface and customer service are awesome too. The only downsides are terrible interest rates and the fact that there's no physical locations.

If you want a stellar online bank without the savings tool, try Ally.
posted by BrandonW at 7:50 AM on March 10, 2015

Be aware in your shopping around that while you may find a better UI, all rates are basically awful. If you want a better rate, you are going to need to vehicle shop as well, though other than a savings account, your choices for liquid savings are going to be limited.
posted by DarlingBri at 7:50 AM on March 10, 2015

I'm going to take a counterpoint here and say that you really don't want a high interest rate for emergency funds. Any kind of interest rate will probably come with some amount of risk and/or lack of liquidity (especially with rates being as low as they are now), which is the last thing you need for emergency funds. They should be the account equivalent of cash under the bed in terms of safety and liquidity. My savings account has sub-1% interest, which I'm totally ok with.

(Now if you hate your bank's UI and customer service that's another story. Personally I can't say enough good things about TD, which I've been using for years).
posted by Itaxpica at 7:54 AM on March 10, 2015

For a pure savings (100% liquid, non-investment) account I've been happy with Barclays.
posted by phunniemee at 7:55 AM on March 10, 2015

Seconding BrandonW - ally (0.99% API for the savings account right now right now) is competitive, friendly, and has a nice UI (especially for transfers).

Plus: they also have great checking (including ATM reimbursements) so you might end up wanting to use them for your other banking needs, which would be convenient.
posted by R a c h e l at 8:00 AM on March 10, 2015

I don't have an emergency fund in the traditional sense of set aside money. I keep a floor in my account that I don't dip below and operate out of that. I switched to a credit union a while back and I get 3% in my high yield checking. I have to use it a lot, and I have to have direct deposit set up, but otherwise it's a great deal. I get about $300 a year just for having money. It also means I try to send less so I can get the full amount, so there is that benefit as well.
posted by cjorgensen at 8:18 AM on March 10, 2015

Thanks all. Just to clarify, I am OK with a rate of 1% or whatever, I'd just be curious to hear if anyone had been with these banks for a while and had the rate stayed at the same reasonable level. Mine is currently %.01 so 1% would be a huge improvement.
posted by selfnoise at 8:18 AM on March 10, 2015

Depending on how much you have in your fund, there are a lot of banks (particularly local credit unions) with rewards checking accounts. The rewards checking accounts typically have a few requirements you need to meet, like doing a few transactions using a debit card, having an auto-deposit from your paycheck, but then they give a larger interest rate than other accounts. There's usually a cutoff for the interest rate though, like $10K. I'd recommend looking into some of these in your area.
posted by treehorn+bunny at 8:19 AM on March 10, 2015

If the previous period of high-interest savings availability is a guide, most/all of the high-interest options will stay pretty close to one another as rates rise. I'd expect CapitalOne 360, Ally, et al to be within .5% or so of one another as rates hit 2, 3, 5% - whenever that does actually happen. Unless I'm misremembering there wasn't much of a range - instead of, say, some banks at 2% and some at 3 and some at 5%, it was "your old-school bank is 0.01% and the online one is 5%"
posted by Tomorrowful at 9:05 AM on March 10, 2015

Alliant Credit Union has always had a competitive savings rate since I've been a member, going on 8 years now. I have a high yield checking account which pays 1.58% on the first 10K and then move the excess of my 10K floor over to Alliant as needed
posted by rabbitrabbit at 9:29 AM on March 10, 2015

Ally Bank has been within 0.05% of the top high-interest savings accounts since I joined them in 2009. So over the past 5 years they have been sticking with the strategy of having the highest or nearly the highest interest rate with a minimum of fuss. If I were in the market for a good savings account I'd be looking at Ally and Barclays, but right now I'm happy with Ally.
posted by Tehhund at 10:36 AM on March 10, 2015

I've been with CapitalOne 360 (formerly ING Direct) since 2005. Back in the day their rates were at 5% (that's just for a basic savings account) while my brick and mortar bank was at .5% or maybe even lower. Looks like they're currently at .75%. I know I could get more from Ally but I'm just not willing to move everything around for that extra $18 a year or whatever it would be.
posted by jabes at 12:51 PM on March 10, 2015

I have an independent financial advisor who manages my IRA and he recommended a C-shares account for this sort of thing. The one I have is essentially an investment account, but heavily skewed towards lower-risk, lower-yield investments. There's a penalty for withdrawing in the first year but I had a smaller savings account at the credit union so I was pretty sure I wouldn't need it that quickly. It has performed pretty well.

So basically I have a smallish safety fund at the CU, and if it ever gets too big (which happened in one good year), I transfer the excess to a C shares account. I don't like having large(r) amounts of money sitting around earning near-zero savings interest!

Keep in mind I am paying him a 1% annual fee to manage all my stuff, so my accrual is lessened by that amount. It's worked out well so far.
posted by freecellwizard at 1:38 PM on March 10, 2015

I put my funds in the best 12 month CD i could find for the most reputable bank. It's only Illiquid to the fact you'll lose some of the gained interest if you withdraw early. I think that's a good way to "not touch" the funds.
posted by sandmanwv at 3:12 PM on March 10, 2015

reddit investments seems to drone a mantra: "Vanguard... Fidelity..." for long term investments. Is this reasonable? I'm actually curious to hear some other opinions about this.

For cash and bills your local Credit Union is usually the way to go, sorry to hear that your experience isn't doing it so well. Perhaps you could try out another local Credit Union?
posted by ovvl at 6:25 PM on March 10, 2015

I've used CapitalOne360 since they were ING Direct, and haven't ever had any problems with them. The bulk of my savings is with them, although I do keep a local bank account as well for when I need to deposit cash or somesuch. CapitolOne has an excellent UI (and a handy mobile app), and make it easy to manage several savings accounts -I have my 'big' emergency savings, as well as smaller ones titled things like "vacation" or "car repair" for known sporadic expenses. If I didn't already have CapitolOne360, I'd just poke around their website and Ally's to see which fit my preferences the best.
posted by csox at 7:21 AM on March 11, 2015

Thanks for the suggestions all. I am going to try Ally and see how that goes.
posted by selfnoise at 9:13 AM on March 17, 2015