Where to Stash Your Emergency Fund (Hint: Not the Mattress)

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Aug 2020

One of the best things you can do for your financial wellness is to set up an emergency fund that covers at least three months of your regular household expenses. It may take time to set aside this amount of money, but once you do, it can take a lot of pressure and stress off of you should the unexpected occur.

But the question is, where should you put this money? Hint: It’s not under the mattress. What you want is a place that will be relatively safe from fluctuations in the stock market and broader economy. You also want your funds to be relatively liquid, which means they are easily convertible to cash that you can readily spend.

The following are options to consider for your emergency fund:

Money Market Accounts. Money market funds are designed to maintain a stable share price of $1 per share. And this is usually the case, although they can breach that benchmark during an intensive market downturn. Money market funds typically give a fairly low but steady rate of return. However, unlike many bank accounts, they’re not generally FDIC insured.

No-Penalty Certificates of Deposit (CDs). CDs are commonly available in very short (1-3 month) to long (5-10 month) maturity dates. These shorter-term CDs are usually FDIC insured and can be an appropriate place to hold emergency funds as long as you can wait until the maturity date. Typically, there’s a penalty for early withdrawal, although some offer a no-penalty option that can be more convenient for your emergency fund. You may however, sacrifice a higher interest rate for the flexibility of no–penalty withdrawals.

High-Yield Savings Accounts. These are available through brick-and-mortar banks as well as online institutions. Typically, online savings accounts offer the highest yields - and often significantly higher than traditional institutions. Make sure that whatever bank you select, your funds are Federal Deposit Insurance Company (FDIC) insured. According to the FDIC, “The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category.”

Roth IRA. This can be another good place to hold your emergency funds. Unlike a traditional Individual Retirement Account, taxes are paid prior to deposit (as opposed to deferred), and there’s no penalty for early withdrawal on your contributions, although withdrawals on any earnings may be subject to income taxes and a 10% penalty, depending on your age and how long the account has been established for.

Treasury Bills. You can purchase a Treasury Bill, or T-Bill, with a maturity date anywhere from a few days to 52 weeks with a minimum investment of only $100. You buy them at a discount and then receive the full face value on their maturity date. T-Bills are backed by the full faith and credit of the United States Government and are considered very safe.

The last thing you want to have happen when you have to tap your emergency fund is to find out its value has been diminished because of unfortunate stock market timing. Keep your fund safe and liquid while minimizing risk so that you can be confident your fund will be fully available to you when you need it.


1. https://www.fdic.gov/deposit/deposits/faq.html

2. https://www.investopedia.com/roth-ira-withdrawal-rules-4769951

3. https://www.investopedia.com/terms/t/treasurybill.asp

Securities may be offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services may be offered through NFP Retirement, Inc. Kestra IS is not affiliated with NFP Retirement, Inc., a subsidiary of NFP.

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