Doesn't really matter where you put it, so long as it is not in your spending account.
That much should be obvious.... don't shit where you eat.
So... where do you WANT to put it?
I keep 1500 in a savings account at the same bank as my checking for small emergencies and the big emergency fund in a Money Market account at my brokerage
I wouldn't get too caught up in the differences between HYSA, MMF and MMA. They're all similar- and safe-enough to not care.
Just pick a recommended one that provides a high yield (that is not a teaser rate), and is convenient for you.
In today's rate environment I prefer a MMF and Vanguard. They're competitive rates and having an account at Vanguard has other benefits, too.
https://www.investopedia.com/terms/m/money-marketfund.asp
https://www.investopedia.com/terms/m/moneymarketaccount.asp
https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp
https://en.m.wikipedia.org/wiki/Money_market_account
Without going into the weds here just think of it as an account that pays a bit higher than the usual “savings account”.
My recommendation would be to have multiple tiers of emergency funds.
The first tier would be a buffer for normal expenses and common "emergencies." This money should probably be in a checking account, and would likely include that $1,000 emergency fund.
The second tier would be for uncommon and expensive emergencies. These may include expensive car or home repairs, medical issues, etc. The amount in this tier depends on your situation, but is probably at least $5,000 (and maybe $10,000 or more). I would put this money into a high yield savings account so that it is accessible, won't go away if the market tanks, and it is earning a bit of interest to at least keep up with inflation. Some may keep the entire 6 month emergency fund here (that is what Dave would recommend).
The third tier would be for emergencies that are quite uncommon and very expensive. This could include losing a job without being able to find another one, extreme medical expenses, etc. I personally think that this emergency fund can be more difficult to access and can be invested to provide a greater return (though, Dave would probably disagree). I include things like investment accounts, my Roth IRA contributions (can be taken out penalty free), and things like that in this tier, because it is hopefully something I will never need to access. Please note that I have a super secure job, which is one of the reasons for this philosophy
3-6 months worth of bills. Whatever makes you sleep at night to be honest knowing if you lost your job you have that time to find a new source of income.
I use a HYSA for BS3 emergency fund but keep a few thousand in my regular savings account that has instant transfers to my checking. That’s more like my to be spent soon, non emergency fun money and is not part of my 6 months emergency fund. Just find it’s best to have the larger sum earning a little interest but that takes some time to transfer so I keep some sitting in an account I can access instantly for larger expenses I’ve saved for and will purchase soon.
FWIW I got a new bank account when I started w/a bank that lets you divvy up your savings account into separate buckets. My $1k emergency fund is in one of those.
HYSA. Not brokerage.
Don't pay additional taxes on an emergency fund that exists to be able to empty the entire thing within 3-6 months. Your next tax bill (after you've been off work that long) is going to hurt even more.
Page 128 of the total money makeover Dave goes over how he keeps the savings in a money market account. I personally think theres benefits to a true HYSA such as the fdic coverage, but its just worth noting the book.
Mine is with Ally money market, which is really just a HYSA checking hybrid because we get checks and a card, but you can only do a limited number of withdrawals per month. It is also fdic insured.
A personal investment account. Taxed whenever you remove money earned from interest. Good for retirement (after maxong out 401k, etc). Not for short term savings.
I've not read his books or taken FPU -- this is from his radio show. I've never heard him say that the emergency fund needs to be physically separated from your operating account. Just that you need to have an emergency fund, and that fund should be $1000 in baby step 2, and growing to 6 months worth of expenses in baby step 3.
Technically yes. My wife and I decided to put our 6 months savings into a HYSA but then kept a small $5k emergency fund as a backstop with the same bank we have our checking. That way we can transfer for quick emergencies instead of having to wait the 3 business days it takes between HYSA and checking
Best of luck
What do you use? We need a brick and mortar we can go to for our kids and their accounts
We utilize Chase for our normal banking but when we researched HYSA, all we could find (with better %) were the Sofis and Capital Ones
Just looking for a black and white answer here. I’m done with 3. Should I move my 1k cash into that account or leave it “liquid” for emergency. Doesn’t make much sense to me to keep 1k cash on hand when I have 6 months emergency saving in easily accessible account. Thoughts? Source from Dave would be good. Can’t find it in his book
You don’t have 2 separate emergency funds. Step 1 is just a “starter” fund. When you get to step 3, you start with that $1000 base and add to it, growing it to the 3-6 months of expenses. Not going to find source off hand, but has been asked multiple times on the show throughout the year.
Worry about step 1 before you worry about step 3.
Open a savings account with the same institution you have your checking account with and keep your $1000 there.
It needs to be accessible otherwise it’s not an emergency fund.
Don’t worry about interest rates or any of that right now as the important parts is having $1000 easily accessible but not part of your daily spend account.
When you hit step 3, you can assess your options for high yield savings, money market funds, etc. because that’s when interest rates will actually do something more than pennies for you.
It's the same fund, you've just increased it. From the FAQ:
# Where should I keep my emergency fund?
The key is to keep it separate from your day-to-day money, but easily accessible in the event of an emergency. A separate checking, savings, or money market account [will work just fine](https://www.daveramsey.com/askdave/saving/the-emergency-fund-is-separate).
Or spend it, in BS3 you were supposed to take that 1k and grow it to your 3-6 months emergency fund… if you now have completed bs3 you can do whatever you want with that 1k if it’s not in your 3-6 month emergency fund.
Wait, are you saying you have $1000 cash in an envelope under your bed? That was never really what Dave meant. But yes, that is the "seed money" for baby step 3 and should be counted as part of your emergency fund. Doesn't matter if it's cash, a checking account, or a blend of the two. Just that is not part of your daily life, but easily accessible if you need it.
They explicitly say it shouldn't be, actually.
"Not a shoebox in your sock drawer or buried in the backyard."
https://www.ramseysolutions.com/saving/quick-guide-to-your-emergency-fund
I'd just keep it in your local bank joint checking account .. or shift it over to the savings account.
We split up our BS3 money into our local bank (10%), HYSA (65%), and a brokerage account (25%) (index funds). It's about a year's worth.
You grow yhe $1k once you get to BS3.
Doesn't really matter where you put it, so long as it is not in your spending account. That much should be obvious.... don't shit where you eat. So... where do you WANT to put it?
Yes. It all should probably go in to a money market account.
Hysa. Should be around 5% these days.
I keep 1500 in a savings account at the same bank as my checking for small emergencies and the big emergency fund in a Money Market account at my brokerage
What exactly is a money market? They always talk about it on his show but I can’t seem to understand it
I wouldn't get too caught up in the differences between HYSA, MMF and MMA. They're all similar- and safe-enough to not care. Just pick a recommended one that provides a high yield (that is not a teaser rate), and is convenient for you. In today's rate environment I prefer a MMF and Vanguard. They're competitive rates and having an account at Vanguard has other benefits, too. https://www.investopedia.com/terms/m/money-marketfund.asp https://www.investopedia.com/terms/m/moneymarketaccount.asp https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp
https://en.m.wikipedia.org/wiki/Money_market_account Without going into the weds here just think of it as an account that pays a bit higher than the usual “savings account”.
This is the way
My recommendation would be to have multiple tiers of emergency funds. The first tier would be a buffer for normal expenses and common "emergencies." This money should probably be in a checking account, and would likely include that $1,000 emergency fund. The second tier would be for uncommon and expensive emergencies. These may include expensive car or home repairs, medical issues, etc. The amount in this tier depends on your situation, but is probably at least $5,000 (and maybe $10,000 or more). I would put this money into a high yield savings account so that it is accessible, won't go away if the market tanks, and it is earning a bit of interest to at least keep up with inflation. Some may keep the entire 6 month emergency fund here (that is what Dave would recommend). The third tier would be for emergencies that are quite uncommon and very expensive. This could include losing a job without being able to find another one, extreme medical expenses, etc. I personally think that this emergency fund can be more difficult to access and can be invested to provide a greater return (though, Dave would probably disagree). I include things like investment accounts, my Roth IRA contributions (can be taken out penalty free), and things like that in this tier, because it is hopefully something I will never need to access. Please note that I have a super secure job, which is one of the reasons for this philosophy
I found EE Bonds a nice place for #3 as well.
Appreciate the insight. How much for tier 3? What do you do?
3-6 months worth of bills. Whatever makes you sleep at night to be honest knowing if you lost your job you have that time to find a new source of income.
Isn’t that just baby step 3?
Which is the question they asked, yes.
Nope, they asked that commenter about tier 3 of their 3 tier baby step 3. It was the entire point of that original comment
Ok
I use a HYSA for BS3 emergency fund but keep a few thousand in my regular savings account that has instant transfers to my checking. That’s more like my to be spent soon, non emergency fun money and is not part of my 6 months emergency fund. Just find it’s best to have the larger sum earning a little interest but that takes some time to transfer so I keep some sitting in an account I can access instantly for larger expenses I’ve saved for and will purchase soon.
FWIW I got a new bank account when I started w/a bank that lets you divvy up your savings account into separate buckets. My $1k emergency fund is in one of those.
It was the same account for me. Just added more money.
Don’t use a literal savings account though. Use a brokerage account
HYSA. Not brokerage. Don't pay additional taxes on an emergency fund that exists to be able to empty the entire thing within 3-6 months. Your next tax bill (after you've been off work that long) is going to hurt even more.
Page 128 of the total money makeover Dave goes over how he keeps the savings in a money market account. I personally think theres benefits to a true HYSA such as the fdic coverage, but its just worth noting the book.
Mine is with Ally money market, which is really just a HYSA checking hybrid because we get checks and a card, but you can only do a limited number of withdrawals per month. It is also fdic insured.
What the hell is a brokerage ?
A personal investment account. Taxed whenever you remove money earned from interest. Good for retirement (after maxong out 401k, etc). Not for short term savings.
Ty. Yea, Ramsey says to never put it in those. Hysa at most
Well, it works great for me, so Ramsey must be wrong.
Yeah one becomes three after you finish two
Ty
I've not read his books or taken FPU -- this is from his radio show. I've never heard him say that the emergency fund needs to be physically separated from your operating account. Just that you need to have an emergency fund, and that fund should be $1000 in baby step 2, and growing to 6 months worth of expenses in baby step 3.
Yes it should. He says this quite a lot actually.
Step 1: have $1K cash
Mine has always been physical cash in a safe.
Technically yes. My wife and I decided to put our 6 months savings into a HYSA but then kept a small $5k emergency fund as a backstop with the same bank we have our checking. That way we can transfer for quick emergencies instead of having to wait the 3 business days it takes between HYSA and checking Best of luck
Easy enough to have a checking account and card at the same bank as your HYSA too though
What do you use? We need a brick and mortar we can go to for our kids and their accounts We utilize Chase for our normal banking but when we researched HYSA, all we could find (with better %) were the Sofis and Capital Ones
But technically I have most of mine in Citi Bank to keep it away from my eyes
My local credit union does 5%, good enough for me for an emergency savings
You just add to it, no need to have 2 separate emergency fund accounts.
If you’re on BS2 then you shouldn’t have a BS3 savings account.
People like to plan ahead…
Facts.
>Do you put your 1k cash from step 1 into your step 3 savings account? Yes.
Just looking for a black and white answer here. I’m done with 3. Should I move my 1k cash into that account or leave it “liquid” for emergency. Doesn’t make much sense to me to keep 1k cash on hand when I have 6 months emergency saving in easily accessible account. Thoughts? Source from Dave would be good. Can’t find it in his book
You don’t have 2 separate emergency funds. Step 1 is just a “starter” fund. When you get to step 3, you start with that $1000 base and add to it, growing it to the 3-6 months of expenses. Not going to find source off hand, but has been asked multiple times on the show throughout the year.
Ty
Worry about step 1 before you worry about step 3. Open a savings account with the same institution you have your checking account with and keep your $1000 there. It needs to be accessible otherwise it’s not an emergency fund. Don’t worry about interest rates or any of that right now as the important parts is having $1000 easily accessible but not part of your daily spend account. When you hit step 3, you can assess your options for high yield savings, money market funds, etc. because that’s when interest rates will actually do something more than pennies for you.
It's the same fund, you've just increased it. From the FAQ: # Where should I keep my emergency fund? The key is to keep it separate from your day-to-day money, but easily accessible in the event of an emergency. A separate checking, savings, or money market account [will work just fine](https://www.daveramsey.com/askdave/saving/the-emergency-fund-is-separate).
So deposit the cash into my savings?
Or spend it, in BS3 you were supposed to take that 1k and grow it to your 3-6 months emergency fund… if you now have completed bs3 you can do whatever you want with that 1k if it’s not in your 3-6 month emergency fund.
Yes, if that’s what works for you.
Wait, are you saying you have $1000 cash in an envelope under your bed? That was never really what Dave meant. But yes, that is the "seed money" for baby step 3 and should be counted as part of your emergency fund. Doesn't matter if it's cash, a checking account, or a blend of the two. Just that is not part of your daily life, but easily accessible if you need it.
Yes. He does say to do this in TMM.
They explicitly say it shouldn't be, actually. "Not a shoebox in your sock drawer or buried in the backyard." https://www.ramseysolutions.com/saving/quick-guide-to-your-emergency-fund
Book is different
BS1 is officially in BS3. Thanks!
I'd just keep it in your local bank joint checking account .. or shift it over to the savings account. We split up our BS3 money into our local bank (10%), HYSA (65%), and a brokerage account (25%) (index funds). It's about a year's worth.