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rated:
Hello all,

So I have diligently been working my way out of the little debt I have and getting a bit more secure with my finances. I have saved up 6 months of expenses (30k) and at the moment it is sitting in a basic savings account earning 0.01% interest.

I have been told that I should move my emergency fund into a Money Market Account where I can earn slightly more interest. Does the minuscule difference in interest make enough difference to open one? Are their better options for emergency funds that still allow the liquidity incase I need to pull some out?

Thanks!

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It is not about bragging but more about some amount of risk taking. If you picked the same time to retire as me, you wou... (more)

PrincipalMember (Jul. 27, 2017 @ 9:42a) |

This is a thread about an emergency fund. Stop blathering on about investing in stocks and getting us off topic. There's... (more)

sfchris (Jul. 27, 2017 @ 12:16p) |

Because things went a bit OT I want to make sure OP sees this reply. This is EXCELLENT advice.

Stubtify (Jul. 27, 2017 @ 12:45p) |

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rated:
Check out a CD Ladder, will be better than .01. Also, if you could open 2-4 High interest checking account/savings accounts you'd be able to get much better returns.  Maybe a combo of both would work as well. 

Promo CD's should be included for your ladder since you'd be breaking the amount up into multiple 6-12 month CDs.

Links:
https://www.fatwallet.com/forums/finance/682884
https://www.fatwallet.com/forums/finance/775437

rated:
The top MM is paying 1.5%. Would you say that's minuscule? https://www.fatwallet.com/forums/finance/783099

rated:

rated:
I'm guessing that most of our wealthy fatwalleters have gotten that way by saving small amounts everywhere possible and watching them turn into LARGE amounts over time.

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If I were starting with 30k and wanted to keep it liquid, with the knowledge I have today, this is what I would do:

1) Open an Ally savings and checking account as my main hub account https://www.fatwallet.com/forums/finance/1553127
2) Start going after bank bonuses https://www.doctorofcredit.com/a-beginners-guide-to-bank-account-bonuses/
3) Whatever won't be used for bank bonuses, I'd put into 5% prepaid card savings accounts https://www.fatwallet.com/forums/finance/1434408
4) Contribute to the amount I can afford to no longer have liquid into a Vangaurd IRA (if eligible for tax advantage) right before filing taxes and invest in a Target date retirement fund
5) The rest I would leave in Ally Savings earning 1.15% or one of the accounts from the thread tantuti linked earning a bit more

I have personally done all of the things listed above, but it took me years to figure them out (should have been more active on FWF years ago). Get started now!

rated:
remmymom said:   I'm guessing that most of our wealthy fatwalleters have gotten that way by saving small amounts everywhere possible and watching them turn into LARGE amounts over time.
  You bring up a valid strategy for OP--sign up bonuses on Checking/Savings accts with the funds. 

Or... use 0%BT CC's and/or prepaid card tricks to create an instant 6 month safety net should you ever need one, put the 30k into higher risk investments. 

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Stubtify said:   
Or... use 0%BT CC's and/or prepaid card tricks to create an instant 6 month safety net should you ever need one, put the 30k into higher risk investments. 
 

  If this is your emergency fund, i would NOT put it in "High risk investments"

rated:
OP,

With that amount you can open an 11-month no penalty CD with Ally @ 1.5%. After (5?) days you can withdraw at any time without penalty so you have access to the funds when you need it while earning a higher rate than a traditional money market account.

rated:
meade18 offers a plan that has possibilities. The problem with bank signups for bonus money is the banks expect you to deposit that money for about six months. Most of them have penalties for early withdrawal. Since this is emergency fund money, that may still be ok as long as you are aware of that.

https://www.doctorofcredit.com/best-bank-account-bonuses/ 

One thing that is a bit more complicated, but offers up to 5% APR FDIC insured for the savings account portion for up to $5000.00 is the insight card.
https://www.doctorofcredit.com/insight-5-apy-prepaid-card-5000/ 

rated:
bchapmanjr said:   Hello all,

So I have diligently been working my way out of the little debt I have and getting a bit more secure with my finances. I have saved up 6 months of expenses (30k) and at the moment it is sitting in a basic savings account earning 0.01% interest.

I have been told that I should move my emergency fund into a Money Market Account where I can earn slightly more interest. Does the minuscule difference in interest make enough difference to open one? Are their better options for emergency funds that still allow the liquidity incase I need to pull some out?

Thanks!
The difference is indeed minuscule, especially considering that you spend $5,000 each month. That's a whole lot of spend for someone who has been diligently working on getting out of debt. While some interest is better than no interest, you should also make sure your budget is reasonable.

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Honestly I'd go for the bank bonuses even if you think it's an emergency fund. Remember you never lose money if you don't fulfill the terms of the bonus. 

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bchapmanjr,

I've just closed the first of four 1 year CDs, offset 3 months from each other (effectively a CD ladder) at Discover Bank, for 1.15%. I rolled the money into a Vanguard Money market Fund, and in a few days I'll know the result. I happeneed to have about the same amount in a bank account, and I transferred it to a Fidelity Money Market Fund. After 3 weeks, I got less than half of the return from SPAXX than I did monthly from the CD.

I'll know in a few days about full-month results.

rated:
Really sad to see people being so risk averse that they are completely missing on the opportunity cost of doing better with slightly more risk. I wish I had the time to create a mutual fund that only did deep in the money covered calls on blue chip dividend paying stocks - so much better than the 1.2% garbage rate.

Not the same strategy as I mentioned above - but a different one which I won't get into. I worked for a company for 25 years. Retired from that company and got all my 401K, pension and rolled it all into an IRA. In less than a year, I am up approx 30%. It just boggles my mind that it took me 25 years to build this account and in just a year, sitting on my but*, I am up 30%. It is all about educated risk taking.  

 

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Remember MM funds are not FDIC protected;

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bopc1996 said:   Remember MM funds are not FDIC protected;Funds in a Money Market account are FDIC protected. Money Market mutual funds are not FDIC protected, but nobody mentioned those.

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PrincipalMember said:   Really sad to see people being so risk averse that they are completely missing on the opportunity cost of doing better with slightly more risk. I wish I had the time to create a mutual fund that only did deep in the money covered calls on blue chip dividend paying stocks - so much better than the 1.2% garbage rate.

Not the same strategy as I mentioned above - but a different one which I won't get into. I worked for a company for 25 years. Retired from that company and got all my 401K, pension and rolled it all into an IRA. In less than a year, I am up approx 30%. It just boggles my mind that it took me 25 years to build this account and in just a year, sitting on my but*, I am up 30%. It is all about educated risk taking.  

 

  
A covered call means you have to own the underlying security, which means you're exposed to the volatility of the market.  Sure you pick up whatever premium you sell at but if the stock drops 5-10% that's not going to help you.  You're up because we're in a bull market, try and back test that strategy and let me know if you're still making 30%.  

rated:
S197 said:   
PrincipalMember said:   Really sad to see people being so risk averse that they are completely missing on the opportunity cost of doing better with slightly more risk. I wish I had the time to create a mutual fund that only did deep in the money covered calls on blue chip dividend paying stocks - so much better than the 1.2% garbage rate.

Not the same strategy as I mentioned above - but a different one which I won't get into. I worked for a company for 25 years. Retired from that company and got all my 401K, pension and rolled it all into an IRA. In less than a year, I am up approx 30%. It just boggles my mind that it took me 25 years to build this account and in just a year, sitting on my but*, I am up 30%. It is all about educated risk taking.  

 

  
A covered call means you have to own the underlying security, which means you're exposed to the volatility of the market.  Sure you pick up whatever premium you sell at but if the stock drops 5-10% that's not going to help you.  You're up because we're in a bull market, try and back test that strategy and let me know if you're still making 30%.  

  A great example of this is AMD stock July 25-26.  DO NOT BUY this stock, I cite it as an example of the possible price volatility in a very short period of time. 14.11 up to 15.65 and back down to 14.76 all in less than 24 hours.  Way too much risk for an emergency fund..

rated:
An example of a CD ladder appoach

An emergency fund should be shorter maturities.

rated:
S197 said:   
PrincipalMember said:   Really sad to see people being so risk averse that they are completely missing on the opportunity cost of doing better with slightly more risk. I wish I had the time to create a mutual fund that only did deep in the money covered calls on blue chip dividend paying stocks - so much better than the 1.2% garbage rate.

Not the same strategy as I mentioned above - but a different one which I won't get into. I worked for a company for 25 years. Retired from that company and got all my 401K, pension and rolled it all into an IRA. In less than a year, I am up approx 30%. It just boggles my mind that it took me 25 years to build this account and in just a year, sitting on my but*, I am up 30%. It is all about educated risk taking.  

 

  
A covered call means you have to own the underlying security, which means you're exposed to the volatility of the market.  Sure you pick up whatever premium you sell at but if the stock drops 5-10% that's not going to help you.  You're up because we're in a bull market, try and back test that strategy and let me know if you're still making 30%.  

  
I should have said, "deep in the money long term covered call". They will easily protect you from 15 to 20% drop and the dividend gives you another 4% cushion. The reason i am using 4% for dividend is that because the call is 15to 20% deep, your net investment is that much lower - so the denominator in the the yield calculation is smaller. And the dividend gets preferential tax rate treatment. As i said, this strategy has to be done witth really solid stocks - not the garbage like AMD which doesnt have any history of dividends or a sane PE ratio.

And i dont expect to make 30% every year but you realize that 30% is almost 30 years of 1% returns. Additionally, since this is my retirement money, I hedge a whole bunch too - even in a flat market, I would do a lot better than 1%. I would be the first one to agree that I would start losing money in a  broad big market correction but also remember, I also look at the stock fundamentals, invest in quality companies, look at their current valuation etc. So the market would have to correct and stay there for several years. What you also forget is that the money I tapped had already grown a bunch due to it being invested over the years in the market. So apart fron the pension money on which I had no contrlol, if i have to guess, over the years, I must have invested around 0.25 which became 1.0 and is now 1.3. If i had to do it over again, i would di it again. You are welcome to stay at 1% and toil away.

 

rated:
When did this turn into a brag thread? You picked the right time to retire. Period. Broken clocks are right twice a day too.

rated:
bchapmanjr said:   Hello all,

So I have diligently been working my way out of the little debt I have and getting a bit more secure with my finances. I have saved up 6 months of expenses (30k) and at the moment it is sitting in a basic savings account earning 0.01% interest.

I have been told that I should move my emergency fund into a Money Market Account where I can earn slightly more interest. Does the minuscule difference in interest make enough difference to open one? Are their better options for emergency funds that still allow the liquidity incase I need to pull some out?

Thanks!

  
I can suggest a home for roughly 10% of your nest egg.  I realize that might not be enough to interest you.  Still:

Hansom CU will pay you 3% interest over a year on an average of $3000.  It's called their Thrive account.  You are allowed to put in $500/month.

Digital CU will pay you 5% interest on up to $750 you put into one of their savings accounts.  The money is completely liquid.

Both of the above have the disadvantage of expense, or annoyance, or both you must endure to become a member of either CU in the first place.  And I understand those factors might be deal killers for you. 

rated:
Stubtify said:   When did this turn into a brag thread? You picked the right time to retire. Period. Broken clocks are right twice a day too.
  
It is not about bragging but more about some amount of risk taking. If you picked the same time to retire as me, you would have put it in a 1% CD. And you can delude yourself about the broken clock theory but long term growth of stock market does not fit that theory. And i know this is safety money, that is why i said deep in the money calls - take most of the risk out. But momma all that doesnt matter - i want to be deaf, blind and not open my mind and just earn a measly 1%.

rated:
PrincipalMember said:   
Stubtify said:   When did this turn into a brag thread? You picked the right time to retire. Period. Broken clocks are right twice a day too.
  
It is not about bragging but more about some amount of risk taking. If you picked the same time to retire as me, you would have put it in a 1% CD. And you can delude yourself about the broken clock theory but long term growth of stock market does not fit that theory. And i know this is safety money, that is why i said deep in the money calls - take most of the risk out. But momma all that doesnt matter - i want to be deaf, blind and not open my mind and just earn a measly 1%.

  
This is a thread about an emergency fund. Stop blathering on about investing in stocks and getting us off topic. There's a stock trading thread devoted to crap like that.

rated:
meade18 said:   If I were starting with 30k and wanted to keep it liquid, with the knowledge I have today, this is what I would do:

1) Open an Ally savings and checking account as my main hub account https://www.fatwallet.com/forums/finance/1553127 
2) Start going after bank bonuses https://www.doctorofcredit.com/a-beginners-guide-to-bank-account-bonuses/ 
3) Whatever won't be used for bank bonuses, I'd put into 5% prepaid card savings accounts https://www.fatwallet.com/forums/finance/1434408 
4) Contribute to the amount I can afford to no longer have liquid into a Vangaurd IRA (if eligible for tax advantage) right before filing taxes and invest in a Target date retirement fund
5) The rest I would leave in Ally Savings earning 1.15% or one of the accounts from the thread tantuti linked earning a bit more

I have personally done all of the things listed above, but it took me years to figure them out (should have been more active on FWF years ago). Get started now!

  Because things went a bit OT I want to make sure OP sees this reply. This is EXCELLENT advice. 

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