Online emergency fund:
Why should you go for
With the recent economic crisis, most people have learnt the importance of emergency funds. Unless you have a good amount of money saved in your emergency fund, you won’t be able to go past a financial crisis. As most people did not have any kind of emergency fund during that time, most of them went on to become a broke! Many a times, people wonder where they should keep their emergency fund – online savings account or money market account. At present, you can find the option of emergency fund online becoming quite popular. You can save money in that online account and use it when you are in a financial crisis.
It should be noted here that at one point of time, money market accounts performed better than the bank savings accounts in terms of interest. But, that time is over now! You will be surprised to note that money markets are only earning around .20%. Compared to that online bank savings accounts are earning around 1.30%.
Advantages of creating an online emergency fund
Well, there are many advantages of opting for an emergency fund online rather than going for money market account. Have a look at some of them:
Better rates of interest: Whether you opt for a money market account or an online savings account, you will find the interest rates to be extremely low. But again, it is a fact that if you save money in an online savings account, you may get a comparatively better rate of interest. For example, you have $10,000 in your emergency fund. If you opt for money market account which has an interest rate of .20%, then you will get $20 in interest for a year. On the other hand, if you go for online savings account which has 1.30%, then you will get $130 in interest for that year. The choice is yours now!
Consolidation of accounts: The emergency fund online offers the option of consolidation various accounts into one. And also it should be noted that it will be easier for you to manage your finances well if you could keep most of your accounts in one location. Too many accounts may make things difficult for you. If you are happy with a particular bank, then you can opt for their online savings account rather than going for any other bank.
Liquidity of funds: Your funds should be liquid and you can easily place your hands on them at the time of emergency. There is no use of an emergency fund unless it is liquid. If you opt for emergency fund online, you will be able to get this benefit. If you have money in an online savings account, then you will be able to transfer the money to any of your checking accounts and withdraw it from any ATM. Money market accounts do not always offer this benefit. So, this is one of the advantages for which you can switch from a money market account to an online account.
Apart from this, it should be noted here that most online accounts are FDIC insured. Insurance for your emergency fund can be a great benefit for which you should opt for online accounts.
All of a sudden you are faced with a situation where you require funds which are beyond your reach and that in a time period where you need it immediately. You check your bank accounts only to put your hands up in despair as you do not have enough funds.
emergency fund online