Where Should You Keep Your Emergency Fund?
An emergency fund should be liquid, safe, and earning as much interest as possible. Parking your emergency savings in a standard checking account means missing out on significant interest income. High-yield savings accounts (HYSAs), money market accounts, and short-term CDs all offer better returns.
This calculator compares after-tax interest earnings across these three options to help you make the best choice for your situation.
High-Yield Savings Account (HYSA)
HYSAs are FDIC-insured bank accounts with no maturity date and unrestricted withdrawals. They typically offer rates 10–20x higher than traditional savings accounts. Online banks often offer the most competitive rates.
Money Market Account
Money market accounts combine savings and checking features, offering competitive rates with easy access. They are also FDIC-insured at banks and NCUA-insured at credit unions. Rates are similar to HYSAs, sometimes slightly lower.
Short-Term CD
Certificates of Deposit (CDs) lock in a fixed rate for a set term (3–12 months for short-term). They often have the highest rates but charge an early withdrawal penalty. For emergency funds, only keep a portion in a CD to maintain liquidity.
Frequently Asked Questions
Both are excellent options. Compare current rates and consider ease of access. Many people use a HYSA as their primary emergency fund account due to its simplicity and liquidity.
Most financial advisors recommend 3–6 months of living expenses. If you have variable income or are self-employed, aim for 6–12 months.
* This calculator provides estimates. Actual rates and tax implications vary by institution and individual situation.