Where to put your emergency savings amid rising inflation

As inflation pushes prices on everything from food to gasoline higher, your emergency cash could be in danger of losing value.

Persistently low interest rates likely will not keep pace with surging costs.

Rapid inflation may continue for several months, Treasury Secretary Janet Yellen said in a recent interview, while other experts see rising prices staying around longer.

In the meantime, you may want to re-evaluate where your emergency cash is deposited.

“With cash, if it’s intended for something like an emergency fund or a short-term expense, it needs to be kept safe,” said Ken Tumin, founder and editor of DepositAccounts.com. “Stocks or bitcoin or other types of investments are not appropriate for it.”

More from Portfolio Perspective

Here’s a look at other stories impacting portfolio planning and retirement saving:

When it comes to storing your emergency fund, there are generally a handful of options: certificates of deposit, checking accounts, savings and money market accounts, and savings bonds.

Each offers potential benefits and drawbacks.

Savings bonds

Online accounts

High-yield reward checking accounts

Around 1,200 U.S. banks and credit unions currently offer high-yield reward checking accounts, according to Tumin.

More than 150 of those provide accounts that pay at least 3% interest on deposits of up to $10,000.

That beats the average savings account, which is typically earning around just 0.14% interest.

Like other accounts, these often come with some strings attached, such as requiring regular debit card usage.

Yet there are other potential perks, such as no monthly fee or 2% cash back on up to $200 in purchases per month, for example.

Certificates of deposit

Look for certain protections

As demand for higher interest goes up, new start-ups are entering this market, which means it’s especially important to know how your deposits are protected.

FDIC insurance will generally cover up to $250,000 if your institution fails. But not all accounts and companies are covered.

Cryptocurrency savings accounts, for example, typically offer no protection.

“I would consider that a high risk and not someplace for your cash,” Tumin said.

Also check to see whether the company is working with one bank or multiple banks to hold your deposits.

“The most important thing is to stick with fintechs that partner with just one bank,” Tumin said.

Some customers of a company called Beam Financial learned that the hard way when they had a difficult time accessing their deposits last year. The company, which had a model that included working with multiple banks, was ultimately shut down by the Federal Trade Commission from engaging in banking activities.

Source link

Share with your friends!

Products You May Like

Leave a Reply

Your email address will not be published. Required fields are marked *

Get The Latest Investing Tips
Straight to your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.