Which Savings Account is Best for My Emergency Funds?

Which Savings Account is Best for My Emergency Funds?

If you’ve already started an emergency fund, then you’re already on the road to financial stability. During the past year, the COVID-19 pandemic played havoc with people’s finances. If you’ve decided to increase your emergency fund in 2021, it’s also a good idea to know where to put it. These include an interest-bearing savings account or a money market account to achieve the best results.  

If you’ve felt the pressure to save more than ever since the pandemic economy created instability for jobs, housing, investments, and other securities, you’re not alone. The global crises depleted savings and made people more determined to create a financial cushion.

If you’re wondering which savings account is best for your emergency funds, check out these three top savings accounts for your backup nest egg.

Why You Should Have an Emergency Fund

If the past year taught us anything, it’s that anything can happen. If you lost your income tomorrow, would you be able to cover your expenses (housing, transportation, groceries, medicine, insurance, etc.) for the next 3-6 months without going into debt?

If the answer is no, then you need to start or build an emergency fund. Having enough money set aside to cover daily needs in a crisis for even a few months can give you peace of mind and a safety net to survive any tough times in the future.

Why You Should Store Your Emergency Fund Separately

Now that you’re on the path to growing your emergency money, it’s time to choose the best place to keep it. If you have an emergency fund, it’s a good idea to store it separately from your regular checking or savings accounts. That way, you won’t be tempted to dip into your nest egg to pay daily bills.  

You will also want to keep it in a liquid, stable, and accessible format. 

It’s also not the best idea to keep your emergency fund in an investment account. While average yearly returns are higher on investment accounts, they are also are subject to downturns in a bear market. In addition, there may be tax penalties for withdrawing funds from an investment account early.

To keep money accessible for any unforeseen event, you’ll want to store it in an account that earns some interest and won’t lose value.

1.     A High-Yield Savings Account

For most people, a high-interest savings account is the best place to store your nest egg.

Keeping your emergency fund in high-yield savings account that is FDIC or NCUA insured means that your funds are insured up to $250,000. The lack of fees and restrictions on many accounts, combined with some of the best interest rates around, make this a haven for growth. 

One good option is the Citi® Accelerate Savings Account. A respected banking institution, Citi doesn’t require a minimum deposit to open this account. With just a $1 minimum balance, you can continue to earn interest on the account. The Accelerate Savings Account also offers a fantastic 0.50% APY that is hard to beat. 

That’s not the only excellent savings account that Citi has on the table. Currently, they also offer a High-Yield Checking account at 0.60% APY and a City Priority Account that comes with a $1,500 cash sign-up bonus (terms and conditions may apply).

Citi isn’t the only trusted financial institution that offers great high-yield savings deals. With the Discover Online Savings Account, you get 0.40% APY on savings. While interest compounds daily, it pays out every month. Another bonus is that Discover doesn’t charge monthly fees for the account. There’s also no minimum deposit to open an account.

2.     A Money Market Account

If you’re looking for an alternative to a savings account, money markets are another way to go. While most people don’t use money market accounts as often as regular checking or savings accounts, a money market account can combine benefits from both worlds.


For starters, their high-interest rates rank with a high-yield savings account. You can also access your money via debit card, checks, or online payments whenever you want.


Some money market accounts might require you to keep a minimum balance to receive a high-interest rate. If you are unable to maintain that balance, the institution may charge monthly fees. However, since you’ll probably need to withdraw a significant amount of money in an emergency, you don’t want to get charged fees or lose a reasonable rate if your balance sinks below the minimum requirement.

3.     A Certificate of Deposit

Traditionally, CDs are a safe way to store your funds while receiving some interest. 


CDs usually offer higher interest rates than regular savings accounts. This can help you keep your money secure while earning something on it. However, the interest rate is locked in when you open a CD. This is a good option when interest rates drop, but it means that you won’t be able to take advantage of it if the interest rate goes up.


When you open a CD, you’re supposed to leave the money untouched for a specified amount of time. However, if you need to withdraw your money in a hurry, you will face penalties for withdrawing early, depleting your fund. This can add up to several months’ worth of interest.

Once you open a CD, you also can’t add more money to the account.

If you don’t mind losing some money if you withdraw early, a CD might work for you. But if you prefer to access your money easily, deposit money regularly, and avoid withdrawal fees, then a savings account or money market account might be a more flexible option for you.

The Takeaway

An emergency fund can provide crucial breathing room if you experience an unforeseen emergency expense. In addition, it can act as a buffer against income loss, housing instability, or medical debt if stored correctly.

If you build up an emergency fund, the best way to grow it and keep your savings buffer from eroding from daily expense dipping is to place it in a high-interest account, a money market account, or a CD.

An emergency fund that earns interest to reduce the effects of inflation remains almost instantly accessible when you need it is an essential step to creating financial security.

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