7 Bad Ways to Increase Your Emergency Fund ...

30
COMMENT

There are many good reasons to increase your emergency fund.

An emergency fund is one of the best ways to prepare for unexpected costs, such as a medical expense, a car repair or unexpected travel.

However, there are wrong ways to achieve this financial goal.

Here are seven bad ways to increase your emergency fund.

1. Ignoring Your Interest Rate

If you're looking to increase your emergency fund, it's important that you pay attention to the interest rate on your savings account.

The rate you earn plays a role in how fast youโ€™re able to grow your funds.

Unfortunately, some savings accounts pay a pitiful 0.01% APR.

But if you shop around and explore other options, you can locate higher rates.

2. Relying Solely on Certificate of Deposits

Opening a CD with your bank or credit union is an excellent way to grow your emergency fund, plus youโ€™ll earn an impressive interest rate.

But unfortunately, CDs are time deposits;

therefore, your money isn't readily available until the end of the CD term.

Depositing money into a CD is smart, but you need to keep some cash in a liquid account for emergencies.

3. Depositing All Your Extra Cash

If you're committed to building your emergency fund, you might deposit all your extra cash into savings.

This will definitely reach your goal sooner.

But if you deprive yourself and don't budget for recreation, you may burnout and give up on your goals.

Put the majority of your extra cash into savings, but also set cash aside for a little fun.

You deserve it.

4. Keeping Every Cent in an Online Savings Account

Online high-yield savings accounts pay more than a regular savings account;

therefore, these are an option if youโ€™re growing your emergency fund.

However, it can take 2 to 3 days to transfer money from an online savings account to your brick-and-mortar bank.

This is a headache if you need immediate cash for an emergency.

While itโ€™s good to keep the bulk of your cash in an online high-yield savings account, also keep cash in your regular savings for quicker access.2

Jumping the Gun with Automated Savings
Explore more ...