Building an emergency fund? Don’t worry about interest rates, earning money with it, and or investing it. (Definitely don’t invest it.) The goal isn’t to make money with an emergency fund; it’s to prevent debt and provide safety.
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“Definitely don’t invest it”, I would slightly push back on: the emergency fund should be put into a money market account, which is currently earning about 5%, half of the historical average of the stock market. So I would say that it should be “earning” something
I’d never in a million years consider putting money in a money market account *investing*. It’s ideal to earn some interest with an emergency fund, but *worrying* about it can cause people to do nothing instead. The goal for many is to start saving *something* for emergencies, anywhere accessible.
I didn’t say “I’d never in a million years consider putting money in a money market account.” I said “I’d never in a million years consider putting money in a money market account *investing*.” I sure want to make more than 5% on investments! But for savings that’s great.
Why on earth not?!? You would rather have your emergency fund in a bank account doing nothing, earning nothing, losing buying power due to inflation? I keep my emergency fund in my Vanguard money market and can access it in 24 hours by transferring it to my bank.
I’m saying don’t INVEST emergency fund money, because the primary goal of investment is to make money. SAVE that money instead, ideally in a federally insured deposit account. A money market deposit account is not what I would consider an investment. It’s savings.
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