- If there's one thing that I hate
it's having cash just sitting around
and getting destroyed by inflation.
In this video, I'm going to go over some options
of where you could put your emergency fund money
while you were in dept and even after.
If you wanna know how much to save for an emergency fund,
then I made a video on that topic.
I'll throw a link down in the description
for you to check out after this video.
Hey, I'm Jarrad from Debt Free Blueprint
where I show awesome people like you
how to get out of debt and create freedom
through your finances using the debt free blueprint.
Whether you're in debt or out of debt
will determine where you save your emergency fund.
My goal in this video isn't to sway you
towards one way or the other.
It's to present to you the options that are out there
and give you my thoughts on each.
Make your own decision based on what sounds more interesting
and fits with your specific financial life.
As you watch this video,
let me know in the comments down below which one
of these sounds like the best option for you and why.
I'd love to hear your thoughts.
Just to give you an idea of
how this video is gonna be structured,
I'm gonna list an option and then I'm gonna talk about it
if you're in dept and then if you're out of debt.
The first and easiest option
for all of us is our local bank.
While you're in debt, you usually don't wanna take on
too much more risk since you're currently overflowing
with risk through the debt that you are paying off.
If all this money is for is to help you float by
while you're slamming all of your other available cash
towards your debts then this is one of your better options.
Because you know that if you put in $1000
then that $1000 will always be there in times of need
while in the process of paying off your debt.
If you're out of debt, then keeping an emergency fund
in your local back will work just fine.
This probably isn't your best option though
but there's nothing wrong with keeping your money here
if it helps you sleep at night.
Keeping your money here will all depend on
if you are more risk-averse.
Next, we're gonna talk about high-yield
online checking or savings accounts.
Now, a few things to keep in mind
with either of these two options.
The interest rate will usually be higher
for an online checking account
than it would be for a checking account at your local bank.
Number 2, the interest rate for the online savings account
will usually be higher than the online checking account.
I'm currently receiving roughly 1.75 percent interest
on my money through the online savings account.
Number 2 B, keep in mind that there are federal regulations
surrounding the amount of transactions
that you can make per month with an online savings account
or with any savings account for that matter.
You're allowed six transactions or less
per month before being charged.
Generally, you won't get charged for transactions
at places like ATMs, in banks, or some stores.
Do not fault the banks for this
because they're just following the federal law.
It's basically to prevent you
from constantly taking your money back
and forth between the checking and savings account.
This usually isn't a big deal though
because six transactions is a lot
and we're talking about your emergency fund here.
If you find yourself hitting
or going over those six transactions,
then you may wanna look at moving
that money into checking account.
If you're in debt,
then I like the online savings account option the best.
I agree that it's still not best return on your money
but this isn't something that you need to be worried about
with your emergency fund while you're paying off your dept.
The goal for your emergency fund while paying off debt is
that the full amount will be there when you need to use it.
You might be worried that you won't have access to the money
like you would if it was at your local bank.
I agree but nowadays you can get this money transferred
into your local checking account
within a couple business days.
Some of these online banks also offer debit cards as well.
If they don't, then you could just use a credit card
to charge your emergency fund amount
then pay it off once the money is moved
from your online checking account
to your savings account at your local bank.
Saving or checking account at your local bank.
With a credit card, you have thirty days to pay it off.
So that's more than enough time to get
that money transferred from your online account
to your local bank account to pay the credit card off.
Yes, you heard me correctly.
I'm actually okay with credit card use
as long as it's paid off at the end of every month
and it's used responsibly.
Being responsible with your finances gives you more options.
Like using a credit card to take advantage
of the points that you get.
If you're someone who is out of debt
and a little more risk-averse,
then this is probably the best option for you.
Specifically, the online savings account.
If you've gotten this far in your financial life
then you'd have 36 months worth of emergency funds saved up.
Since that is such a large amount,
you most likely will not need access
to that full amount if something goes wrong.
The only time you would need access to all of that money is
if you lost your job or some other huge emergency happened.
If that happened, then you could just transfer the money
from your online account to your local account
one month at a time until you find the next job
or get out of that specific emergency.
This is actually where I keep a large portion
of my six month emergency fund.
I'll throw a link down in the description
of which bank I currently use.
Next, is invest in your emergency fund.
(gasps)
What?
You shouldn't invest your emergency fund.
This is one of the more risky things to do
with your emergency funds but wait a minute
to hear how I think that you can mitigate some of the risk.
If you are in debt then there is too much risk involved
in going this route.
Finish getting your debts paid off
then let's talk about where you may wanna put
your emergency fund in the future.
If you're out of debt,
then you're in a position to take a little bit more risk.
There are ways you can invest your money in a safer way
than just putting them into a single stock.
I would ever recommend you putting
your emergency fund in a single stock.
No and hell no.
Let me put a little disclaimer out there now.
I'm not recommending that you do this.
If you don't feel comfortable doing this
then please keep your money somewhere safe
like the things we already talked about.
I'm a huge proponent of investing in low cost index funds.
While there is always risk associated
with investing your money in a stock market,
if there was ever a time to do it,
it would be when your debts are paid off
and you are in a financial position
to potentially risk losing some to gain some.
I wouldn't recommend investing your whole emergency fund.
That would just be stupid, not smart.
Here's what I'm in the processes of doing
with my six month emergency fund.
I wanna give myself a chance to beat the inflation rate
or possibly make some extra money in the process.
I also wanna keep my emergency fund somewhat safe as well.
So how can I do both?
I'm going to be investing a small portion of my money,
my emergency fund and keeping a larger portion
of this in an online savings account.
The portion I'd be investing would be about a 60/40 split
with the larger portion being invested in bonds.
Another reason I feel comfortable doing this
is because I'm pretty darn financially secure
and have a stable job.
I'll tell you now that if I happen to lose my job tomorrow
then I wouldn't be holding my money
in any investments like this.
I'd move it all to the online savings account.
I've actually thought about documenting this process
by making a monthly update video
to let you know what's going on with that part
of my emergency fund that invest in.
That way, you can see whether it was a smart move or not.
Let me know in the comments down below
if you'd like to see this.
If you do then once those videos are created,
I will throw you a link in the description
of this video so you can follow along.
Now, I would be investing this part
of my emergency fund into a taxable account.
And one thing to always keep in mind
when investing in a taxable account
is that you will pay capital gains taxes
on any gains you have in that investment
when the money is withdrawn.
For example, if I invested $1000
and withdrew the money once the total was at $15,000
then I would pay capital gains tax on that $500 gain.
Another thing to note is that you are taxed
at a higher capital gains rate if you sell the investment
within 12 months of purchasing it.
You pay a lower capital gains rate
once you sell the investment after 12 months.
Figuring out where to put your emergency fund
is the easy part.
The more important part of an emergency fund
is actually having one.
If you don't have yours fully funded,
then let's get it going because it's not a matter
of if a financial emergency is going to happen to you,
it's when that emergency is going to happen.
Feel free to sign up for the money management course
waiting list where we talk about things like this.
A link is in the description.
Make sure to smash that thumbs up button
and pick up your free copy of the Debt Free Prep Workbook.
I'd love to have you as a subscriber
so we can stat getting you to the point
where you are financially free.
I'll see you in the next one friends.
Adios.