What about an annuity indexed to gold? As long as there are no fees and no outrageous surrender charges, you get all the benefits of a year where there are massive gains, but can never lose any money on it… it’s a perfect parking lot for emergency cash!

Bob in SC: PS: Sorry, the funds you mention must pay for the credit card debt. OK, but you still incur unnecessary fees.
Banjo in UT: I don’t play banjo; how about a harmonica instead? (ah,chuckling).

Lee Marks: gold is money in some nations (although not the U.S. since 1971; seems the Government didn’t want to compete with a tried-and-true currency).
Amy in CO: Yes. Um, you have to pay that money back or lose the house. Why do people choose to
securitize,or collaterallize, their debt with home equity loans/lines of credit rather than split the difference and keep half the extra payment for emergencies?
(For the record, if you are in a severe enough emergency, you might NEVER be able to repay the debt).
Bob, SC: Just remember when you sell the shares that it takes three days to clear your brokerage,after a commission, and let’s not forget to leave aside the taxman’s take, if necessary. Assuming the kitty is enough to cover your emergency–three to six months’ worth at once,or perhaps a redemption in periods,racking up fees and taxes and paperwork?

Here’s how I do it: I shop around and purchase short-term CD’s (3 or 6 months, FDIC insured) that are usually above the inflation rate. Since emergencies are rare, I rely on my home equity line to cover whatever cash is needed. Then when my Cd’s mature I cash them in and pay off the loan.

Indeed, my emergencies have been so rare, that I haven’t actually had to put this in play yet, therefore keeping my short-term “rainy-day” funds in higher interest bearing accounts, and thus getting more return on my money.

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” ~Thomas Jefferson

Wow, lots of gold haters here. Gold does not inflate nor deflate, nor does it degrade like the dollar, 1 ounce will always be 1 ounce. Soon a dollar will buy what a quarter used to get ya.

Jim, why waste your time on gold when you could put all your money in corn derivatives? You could have a 62% return by the end of the year!

My IRA and 401K are sitting safely in money market funds - have been there well before the stock and credit crash. May be earning smaller returns but I’m not losing money like the people who left their money in the stock and bond market.

I’m wondering why anybody with a house and some equity would keep ANY money in a rainy day fund earning a pittance of interest (.5% or a few pts more for CDs, which are then taxable). I do have 401K and IRAs, but I have zero money in rainy day savings. Rather, I’m paying off my mortgages on my primary house and investment house as fast as I can. Therefore I am saving all that interest money. I have a sufficiently large home equity credit line I can draw on instantly for emergencies. Is there some downside I’m missing?
Thanks.

“Shift your assets into gold. It is the only safe haven right now. Go to Gold101.com. Ask for Manny.”

Um… Jim Cannon, I beg to differ. This is not the investment portfolio we’re talking about; this is the “safe money”. And if you bought gold about 2 months ago, you’re down about 15%. And that’s not counting inflation. Let me make this clear: money you put under your mattress has returned 0% (before inflation); gold has returned around -15% (before inflation). You do the math.

Of course if we’re talking about long-term investments we can have a different conversation.

And as for the tax issue you bring up, gold causes no dividend tax (a byproduct of paying no dividend) but unless you cheat on your taxes it does indeed produce a capital gains tax if it pays off. But I’ll give you one thing: if you bought your gold about 2 months ago and sell it today, you won’t owe any capital gains tax and you’ll have a nice loss to offset the gains you’ve made elsewhere. But I didn’t realize the purpose of a “safe” account was to generate a loss for tax purposes.

is a mixed portfolio good gold,cash and real estate or should I pay of debt like credit cards

You are all looking at this the wrong way. Take all that emergency cash out right now and buy a really good banjo and some banjo-playing lessons. When you lose your job and there’s no food to eat, you can pull out the banjo and have yersef a good time.

Could you please explain to me why gold prices have gone up 200% since 2002

What goes up, must come down. Gold is a highly volatile commodity. It is not appropriate at all for short term cash for that reason. Right now it probably isn’t appropriate for anything since you are likely buying at the top of its pricing cycle.

Kinda funny reading the short sightedness of this article and comments. What you should really be worried about is the morning you wake up and your bank is closed, very closed.

Those of you who are pushing gold as a “rainy day” asset are trying to put your fellow men in a very dangerous position. The price of gold is highly volatile, as its recent sharp decline illustrates. There is no guarantee that when you need the money, gold will not be down and you will suffer a loss. You should not view gold as a short-term investment for the same reason that you should not use money you may need in the short run to buy stocks (high risk/volatility).

Always be suspicious of those who strongly advocate for gold. Often they already hold gold and want to get other people to buy so that the increased demand will push the price further up in order for them to make a capital gain. Their advice is to their interest, but not necessarily to yours.

I agree with this article. This is a very risky time and you won’t find brokers willing to tell you the truth about the stock market.
Snead, you are absolutely correct. I worked in real estate titles and was laid off five months ago and still nothing.

Napa, lay off Jamestown. I am from Western New York and that view is very appropriate for the economy there. Unless you are from the region, don’t make judgments.

RE: Wade Danner, New Market MD : May 7, 2008 11:25 am “3% of $10,000 is $30 a year. Is $30 in devaluation worth the cost of having $10,000 stashed in some fire proof location in your house?” - 3% of $10,000 is $300

Tim - You mean you can write off $3,000 per year against ordinary income or losses up to capital gains if you itemize.

Any thoughts on savings accounts with Capitol One online banking? I think their rates are decent.

Most people do not work in a government insured job or own rental properties, without that job secuirty or those secondary sources of income, 3-6 months in reserves is acutually optimal to maintain paying bills, cover for any emergencies (especially medical), etc.

What is the problem with keeping your money in stocks, and keeping a low balance on credit cards? If an emergency comes up you can always sell some shares, and pay off your credit card with that money a little later. This way you are avoiding the low returns that savings accounts are offering right now. You can then take that emergency fund money, and buy some shares while they are still cheap.

Who is such an “idiot” to keep its money on a US Money Market Account? I keep it in Budapest/Hungary receiving 8% pa and the Hungarian Forint went up by 35% against the USD.

what money in savings are you guys talking about. Everyone I knows is just trying to get some money to eat this week.

I would have to agree with Mr Updegrave. I’ve always kept six months living expenses in a cash account. I could care less about the yield because its not an investment, its self-insurance. If you keep saving and invest it wisely, the cash reserve becomes a small part of your holdings. Keep it in perspective.

It is quite amazing that so many of these comments are espousing the virtues of gold as an investment. Seems like spam, honestly.

“Those who cannot learn from history are doomed to repeat it.”

(1) Gold tanked after ~1980. So why does everyone believe it can’t again?

(2) As soon as something is a “can’t miss investment” I’d be looking for something else, not diving in head first. See the 1st internet bubble, the latest real estate bubble (their was one in the 1830’s as well), etc.

Gold may well be a better investment than stocks, bonds, savings accounts, etc. But I’d just be wary of assuming it is a safe sure-fire way to beat inflation.

You are mixing up savings from capital. Savings isn’t meant to make you any money. It is a backfall. Capital is the money available for investing after you have proper savings. The state of the economy should never make a difference on where your savings is. It should either be in a bank or your safe.

Also, Gold is great if you invested a few years ago. Silver even better if you invested in the early 90’s. look at what gold did in 80’s Hmm see a trend? Gold can be nice, don’t get me wrong but now is not the time to get into gold.

I would like to add to Bruce Purnell’s comment. Fear of the penalty for early withdrawal of a CD seemed asinine. First, the rainy-day fund should be for major emergencies, such as a loss-of-job, not for car repairs, etc. So, the vast majority of people will have such a savings for years before they might need it. Therefore, they will earn higher CD rates for years. If they ever do need it and pay a penalty, the total penalty will probably only make a small dent in their total earnings, so they’ll still be ahead.

Plus, there are ways to mitigate such risks. Keep enough money in a savings account for a couple weeks worth of bills. If you lose a job, you’ll still get another pay check and have that small savings. Then, take your 3 months worth of money (or better yet 6 months) and divide it into thirds, putting one-third in a 6-month CD every other month. That means, every other month, you’ll renew a CD.

If an emergency comes, you’re never more than 2 months away from being able to take money out of a CD without penalty. If one spouse loses a job (assuming you’re married and both work), you might even be able to get by a couple months on your small savings and last pay check.

Shelly, Maryland : May 7, 2008 10:19 am, I just checked ING Direct and the best they have on any type of account is 3.4 APY. So where is this 4.5%

Countrywide’s money market and savings links have the best rates. Check them out. The savings link has APY of 4% for $10,000 and above

Hey CNN Money Moderators: Why are these people selling gold or notes allowed to post on here? They are junking up the discussion. Boot them!

We have to live with this low rate interest environment. Preserving the principle is the primary concern. Distinquishing between “emergency funds” and “long term funds” is critical for keeping up with inflation.
My emergency funds needed for the next two years are in bank accounts or money market accounts at a local bank (college tuition, etc.) Interest rates is around 3%.

Funds pulled out of the stock market to preserve some capital….are in long term CD’s now paying 4.75%. I figure if rates go higher…I will take the penalty and reinvest. The penalty will offset any interest rate gains either from the stock market or other CDs on my taxes. Not a perfect world but ..it is what it is.

The long term rates on CD’s are so much better than the short term…that there is almost no incentive to buying the short term stuff.

No one really knows where interest rates will go. They might go lower for longer than some are anticipating. They did back in 2000/2001. They may stay low until the housing market has actually found a bottom which won’t be until all the inventory has been cleared out.

It’s hard to beat E*Trade Bank for these emergency cash reserves. The current rate is 3.15 APY and only $100 minimum to open a complete savings account. Quick access and good rates on CD’s as well. And of course fully FDIC insured.

Whole article couldve been reduced to the last paragraph

Hey Ya’ll! Let’s throw our CASH into OIL STOCK FUTURES so we can watch oil prices increase to $10.00/gallon?

You should have a saving account outside of U.S. A Euro Saving account can earn you 4% interest. However their inflation rate is much lower, and best of all they don’t report your earning back to the IRS, which mean no tax on your 4% interest. Unless you like to report that to uncle Shame.

Gold may have been a good investment for the last 5 years, but what goes up WILL come down. Gold is at an all-time high so it WILL come down eventually. It is not a good investment.

phelps county bank in rolla, MO still has ultimate checking with a 5.25% rate. it has been profiled in WSJ. phelpscountybank.com look it up

Let’s look at this “Rainy Day Fund” from a different perspective. If anyone out there has any credit card debt, or balances, you are paying the bank anywhere from probably 9.9% to 24.99% or higher!!!! Wouldn’t it make sense to pay off these balances, saved the incured interest charges, increase your monthly cashflow…Put a little more money in long term, higher yeilding investments, and keeping some money handy? I think that keeping 3 months worth of expenses “Safe in the bank” is costing you money in the long run. Just my opinion…

For centuries knowlegable investors have coveted gold because it is the ultimate source of refuge in economic and geopolitical upheaval. When these situations cause paper securities to wither, precious metals are the only investment that will reliably increase in value. For investors seeking broad diversification against catastrophic loss, authorities recommend that you put at least 40% of your portfolio in gold. Preferably 50%. Call 888-966-6465, ask for Manny, he’ll help you move into the rising field of GOLD. Remember, if you can’t hold it, you don’t own it.

What about annuities? Indexed annuities to be specific (as long as there are no fees and no outrageous surrender charges). You can get the benefits of a stockmarket year where there are massive gains, but can never lose any money on it…it’s a perfect parking spot for emergency cash!

WAMU has a online saving account at 3.33% APY and it is super easy to transfer between your WAMU checking account and the online saving, just with a click of the mouse. And if you need the cash you can just go into the bank.

Manny and others, stop spamming these threads with your sales pitches for gold.
Gold is a terrible investment, I recommend that potential investors do some research, and they get fooled by you cherry picking the good years for your examples.

> Corn has went up 31% this year alone.

Jim, corn has *gone* up 31% this year alone.

But why waste your time running schlocky promotions for gold101.com when you can put all of your emergency expense funds in corn?

That way, if you lose your job and your car blows up, you can at least put food on the table.

You might get a little tired of eating corn all the time, though.

Seems like a lot of gold salesman out there…………

Hold on, Manny’s calling me back - he’s had a busy week.

To Rob, in Baltimore, MD. You are getting 2.5% return on your passbook savings account, which seems really high. You addressed the 3.1% inflation. What you didn’t address was the fact that you will pay taxes on that 2.5% return. You are not even keeping up with inflation. Factor in rising fuel costs, and the food inflation. Corn has went up 31% this year alone. By placing your money in a savings account, you will just watch it wither away. Shift your assets into gold. It is the only safe haven right now. Go to Gold101.com. Ask for Manny.

I Bonds-forfeit last three months interest if cashed before 5 years old.
Fixed rate (1% ,right now I think) for life of bond, plus whatever inflation rate is every 6 months. State and local tax free. Buy at US.Treasury web site or local bank.

I understand the general frustration people feel because of the lack of an upside you’re emergency funds generate in a savings account. Although my buying power might be diluted by inflation, the dilution is minimal - apprx. $5/month (assuming a $10,000 savings account, 3.1% inflation and a 2.5% savings rate). Plus, the 2.5% return is a lot better than my brokerage account did during the 1st quarter - at least it’s in the black. If the “inflation premium” I have to pay to insure that I don’t go into 12% - 18% credit card debt if I am laid off, is $60/year, I’m okay with that. It’s an issue, I just think it’s a minor one. An FDIC insured savings account is absolutely a good idea for your emergency funds.

Hi Dan in Des Moines Iowa
In regard to your comments regarding
unsecured subordinated investment notes,
I would never go out more than l year and
try to stagger any investments over 3 month intervals. I would watch the quarterly profits like a hawk and cash out if there are any hiccups in the quarterly results. No stocks give any
guarantees of capital gains and many of
us received heavy losses in such stocks
like Lucent etc without any dividends
to show for it. I have previously invested with Sumner Harrington and have used the above strategy and it has
worked successfully for me. Go out short term, watch the profit of the Company and cash out when desired.

Bryan,

Gold is an excellent hedge against inflation, political instability and it is accepted and preferred everywhere over any paper based asset.
It can be easily liquidated. Could you please explain to me why gold prices have gone up 200% since 2002 if the total amount of mined gold has remained roughly the same at 140,000 tones world wide? Could it be that the value of fiat currencies across the board has gone down? I would also advise to purchase other precious metals such as silver, platinum and palladium. Commodity investments are inflation proof and they can and often do reward with decent increase in value. On top of that, by directly purchasing them (bars, coins, etc.) they remain in your direct possession.
In times of instability, paper assets can be frozen, confiscated and otherwise rendered useless. I am not suggesting a high probability of such a scenario in today’s world but history tells us that such events have taken place in most every nation at some point in the past 100 years. All history lessons aside, a well diversified liquid portfolio with 50% holdings in gold is a great way to protect your wealth and above all an easy way to tap into it if necessary.

Vanguard’s best-yielding taxable money market fund has had a lower yield for a while now than the Vanguard tax-exempt money market fund. Even without the tax savings, it’s a better deal.

FDIC-Insured doesn’t mean anything. It’s a claim that makes people feel like they have a guarantee. In actuality, if everyone pulled their money out at once, every bank would be bankrupt. This is all electronic money we are talking about….there is no tangible “dollar” when you are talking savings.

I tend to follow what the Fortune 100 companies are doing. Take GE….if they are investing overseas (India and China) then that’s where I’ll take a look. They are always looking to increase their returns to their shareholders as high as possible, and I think I’d like to, on a personal level, do the same.

I’ve had my emergency fund savings in the INGDirect Orange Savings account for three years but their interest rate recently fell enough to prompt me to look elsewhere. Capital One is offering a 3.75% rate on savings with $10,000+ balance. Best rate around. I just moved all my money.

The key term here is liquidity. i.e. My car dies tomorrow and I need $10,000 in cash right now. Or fill in the blank with whatever the situation might be. You can argue about the degree of security that stocks, money market accounts, savings accounts, any of those accounts have and the answer is all relative to the risk you’re willing to take. Money market accounts clearly state there are no guarantees that they won’t lose money. Likewise, if something crazy were to happen and there was a run on the banks, there’s no guarantee you would actually be able to get your money out of your account. Do some of those scenarios sound extreme? Sure they do! How far do you want to go to have the access to cash? 3% of $10,000 is $30 a year. Is $30 in devaluation worth the cost of having $10,000 stashed in some fire proof location in your house? It’s all a matter of preference and how much trust you’re willing to put into the status quo.

ING DIRECT! It’s the best way to go… averages about 4.5% interest on savings accounts. I have three with them! They don’t have any overhead, that’s why they can pay so much. They are FDIC insured. I have a mortgage with one of my homes with them too. It’s the best bank I’ve ever had!www.ingdirect.com

Gold I believe is the best bet, keeps its own against the tax of inflation. Gold has no liability’s, and has a proven track record of over 6000 years as money.
In Gold I Trust, If you don’t hold it, you don’t own it.

Consider I-bonds, safe with a current rate of 4.84%, must hold for a minimum of one year, forfeit last three months interest if cashed before maturity, these bonds have a fixed rate and a variable rate that is reset every six months, buy from US Treasury

Keith, these sound a tad bit speculative for an emergency cash reserve.

======================
http://www.cpsnotes.com/faq.php#1

What are the risks related to the notes?

You could lose the principal amount of your note plus all accrued but unpaid interest if CPS encounters serious financial difficulties.

Please read the section of the enclosed prospectus entitled “Risk Factors”, which describes the material risks related to the notes and the business and litigation risks related to CPS.

Unfavorable outcomes regarding any of these risks, including current and future litigation proceedings, could impair CPS’s ability to make note payments.

Are the notes insured?

No. The notes are not insured by the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation or any other agency or company. They are obligations of CPS only.

Are the notes rated?

CPS has not requested a rating for the notes. However, third parties may independently rate them.

Are the notes secured by any collateral?

No. The notes are unsecured. Note holders do not have a lien on any CPS assets.

What is the priority of the notes?

The notes are subordinate to all other existing and future secured, unsecured, senior and subordinate debt obligations of Consumer Portfolio Services, Inc.

If the company encounters serious financial difficulties, principal and interest payments to secured and higher priority creditors would take precedence over payments to the note holders.

The company currently has substantial debt and is likely to incur or issue additional debt that would rank senior in priority of repayment to the notes. See the prospectus for more details.

oscar, gold is not a good investment. yes it has skyrocketed over the past few years but take an examples of someone who invested in gold in 1980 (when calculated in todays dollars) would actually have lost money after a 28 year investment….that doesn’t seem too secure, definitely not for a secure emergency fund.

Compare this to the DJIA in 1980, which was < 1000 and now is over 13K!! Seems like the market, over time is the best consistent investment for long term holdings.

One always has to balance risk with reward and in this case, an emergency fund should not be risky. I agree with everyone else the interest rate isn’t as important as making sure that the funds are there and guaranteed by FDIC.

The only flight to safety at this point, is Gold. Sure it’s nice to talk about a 3-7 percent return on a paper based asset such as stocks, bonds, savings account, c/ds, but in reality the return does not even keep up with inflation. Not to mention that you get taxed on those profits. Inflation has been cited at 3.1 %, but that doesn’t take into account food and energy (oil), which puts inflation at an actual 12%. Gold has averaged 32% increase each year for the last five years, and investment grade gold has returned a 50% increase in the last 12 months. It IS very liquidable, and investment grade gold are private assets, non taxable. Stocks are not the place to be, and anyone advising you to stay in the paper market is only costing you money. Call 888-969-6465, ask for Manny, and I’ll help you move into the rising field of GOLD. Did you know that you can roll your IRA or 401K into an IRA backed by gold? You can. Make the call, we will do all the work.

I have invested some idle cash in short term renewable unsecured subordinated
investment notes offered by Sumner Harrington Ltd out of Minneapolis. These
notes are offering considerably higher
rates of return than CD’s and have durations of 3 months to 10 years. Call
Sumner Harrington at 800-234-5777 for a
prospectus and investment kit. These
notes offer an alternative to the extremely low rates being offered by most banks today.

My online money market with M & T is 3.25%; my online savings with HSBC is 3.05%. Both are linked to my checking accounts so I can transfer same-day.

Keep in mind that one reason someone would want a rainy day fund is so that short term emergencies aren’t funded by using credit cards charging 12-18%. Based on that theory, money in a savings account is earning 12% because you have access to borrow from yourself at 0% cost of funds. The second reason to have a rainy day fund is to cover pre-existing fixed expenses in the event of job loss. Since my largest fixed expenses that need covered during job loss are not subject to an increase due to inflation, ie my fixed rate mortgage payment is going to be the same this year, next year, and the year after that, the money in a savings account has the same paying power this year, next year, and the year after that. These are two major reasons that returns on your emergency fund are much less important than it would seem.

Oscar, Gold?

Try using gold to pay for a flooded basement and groceries for the two months while you’re out of work….

I’m sure the mortgage company would appreciate gold as a means of payment…..

Plus, how much commission do you get from selling gold?

“Are you crazy? The only way to ensure maximum safety in today’s world is keeping the cash under your mattress.”

That is a dangerous mindset, and a very misleading comment. Where’s the mattress if the house is being foreclosed on? What if there is a fir? A robbery? You are a FOOL. A savings account is FDIC insured. Fees can be waived if you do what the PURPOSE of the account is for. I’m amazed how many people want a free savings, but don’t want to put money in it… that’s like wanting to buy a car, not pay the insurance because they don’t want to drive the thing. Foolishness. I’d rather my money be secure, FDIC insured and at least earning SOME interest.

Keeping it under a mattress- aside from being dangerous- is lOSING value, not gaining it.

Get your head out of the sand, be smart with your money, Jamestown, or your money will disappear faster than the settlers from… well… Jamestown.

Currently, my CU is offering 3.46% APY interest on their high yield savings accounts. Come June, my CDs mature at a national bank. I will be taking my money out and putting it into my high yield account. CUs generally pay more interest than do banks. Nowadays, anyone can join a credit union which are usually federally insured just like a bank. P.S. I hope that the Fed is done with rate cuts. They only fuel inflation.

It hurts to have a chunk of change sitting at 3% but not having the cash can hurt worse. Emergency funds plug the financial gaps left by an unexpected expense or job loss. They provide peace of mind not long term growth. Not having the savings will cuase you to lose more sleep than only getting a 3% return.

The smart thing to do is to take one half of one’s savings and purchase gold in the form of 24K .9999 bars: 10 grams (1/3 Troy Oz.), 30 grams (1 Troy Oz.) or even 300 grams (10 Troy Oz.) are excellent choices. Gold prices have gone up about 200% in the last 5-7 years. Fiat currencies (dollars, euros, yen, yuan, etc.) are essentially backed by nothing more than faith and as such can be printed in vast amounts (see inflation and hyper inflation) while gold’s value is protected by its limited amount.

Are you crazy? The only way to ensure maximum safety in today’s world is keeping the cash under your mattress.

Ron - I agree 6-18 months for an EF is a little much, but it all depends on the person’s risk tolerance. For example, if the person who suggested 6-18 months is a realtor and doesn’t see an end to their sturggle, it might be a good idea to keep that amount liquid. However, for the person who is secure in their job, 3-6 months should suffice.

I completely agree with Walter - interest on this kind of account is not the issue. Make sure it’s liquid, and if your amount for 3-6 months of expenses changes (i.e. new born baby to feed, etc.) then adjust the amount in the fund accordingly.

Wow, 6-18 months expenses in reserves? There is no way I could sanction that for me. While I am a naval officer and have great job security, the thought of having something like $100k in reserves earning NOTHING is unthinkable. Besides, how long would it take to build up reserves that large? For me to burn through that much cash, I would literally have to lose my job and not find another, have the tenants in my rental property vacate and not find a tenant for the untire period in question, and not have my wife make anything.

I’m still working on getting the 3-month cash reserves up and running. I think I’ll just stick to that.

I would suggest ING Direct (www.ingdirect.com). Their basic savings account is currently earning 3% and their checking accounts are around 2%.

You can also easily transfer money between your current bank and ING accounts within 2-3 days. You are even able to make ATM withdrawals from multiple locations (you can find the list through their site).

We have been very happy customers for more than 3 years and have never had any issues at all. I love the fact that are regular interest rates compete with bank CD rates. I highly recommend ING Direct!

If you are willing to use online banking, you can get good returns. Check out bankrate.com for the higher rates. Currently, I have a SavingsLink account at Countrywide at 4.0% and a checking account at Charter Bank (Turbo Checking) at 6.01%.

Another way is to roll your CD’s basially spread your cd’s out so that every month one matures. You shouldnt need all your rainy day money at once anyway.

In a sagging economy and jobs leaving the country on a continual basis, I think a 3 month cash reserve is the mind set of a gas sniffing optimist. 6 to 18 months is the reality. I notice Walt does mention laddering CDs which is a excellent way to a slightly better rate than a passbook and you have money available every month without penalty.

Am I missing something here? If your 3 month living expenses is $30K and you’re lagging inflation by .6% that’s $15/mo. Get a life, look at the big picture and forget about short term rates being low on your rainy day fund.

I have my emergency cash in a savings account online with IGObanking.com. The current rate is 3.28% which isn’t great, but much better than other options and unlike a CD it is 100% liquid.

You didn’t even mention online savings accounts.

Don’t those offer a decent interest rate for the flexibility?

Or open a scottrader account. Only $500 to get one.
Recently my credit union started charging me an “inactive account fee” of $5 per month to hold my money. True, not a large amount but in principle I could not agree with that. I put my money in a scottrader account and as of yesterday its up 72%. Way better than the credit union ever paid. True this is not without risk. Scottrader is not FDIC insured and short term gains are taxed quite heavy. But most major cities have a local office that if you need cash you can pay your $7 commision and go get your money.You do need to invest some time researching your stock picks. I found that buying only dividend paying stocks works best for me. Count on leaving stocks unsold for a year will help on taxes. (long term gains) And stocks can tank in a heartbeat so you have to keep tabs on your picks. Plus you can write off $3000 per year on losses if you itemize on taxes.

THIS is great advice. Look what happened to the Schwab Yield Plus fund, which advertised itself as almost as safe as cash, reached for just a bit more return by utilizing mortgage-backed securities, and got killed.

Preservation of principal is king!

A rainy day fund is strictly an emergency measure. Earning interest is a minor concern. As living costs rise, the only way to keep up is to keep stashing cash into the fund. All that matters is access to that 3-months MINIMUM fund.

I have my liquid funds in a 5 year CD. I did this because the penalty is 6 months interest without risk to the principle. The worst case seems to be losing interest and my principle is still protected. I’ve now been in it for 6 months, so I have the higher interest and I’ll get better returns as time marches on.