An emergency fund is integral to achieving our financial goals and staying out of debt. However, because we think of an emergency fund as a lifeline and not a savings tool, we often fail to consider using the money to make money. Our emergency funds often contain a considerable amount of money that should be put to work.
Implementation and cost
Move your emergency fund into account that has the following:
- Low risk such as a savings account with a financial institution.
- No withdrawal restrictions or penalties (you should be able to withdraw the principal in the account quickly and without a fee).
- High yielding interest payments (shop around and choose the account with the highest interest rates.
If your emergency fund contains $50,000 and you do not touch it or make any additional payments for 50 years, you will earn $555,969 in a savings account paying an average of 5% compounded monthly.