An emergency fund is vital to a strong financial foundation. Once you know the basics of saving money and have put aside enough money for your emergency fund, where are some places you could keep it?
Credit Unions
A credit union is a similar to a bank, but is owned and controlled by people who use its services. In some cases, certain credit unions might be reserved for members of a labor union, a religious group or employees of a company. Credit unions may offer a smaller range of financial products than a large bank but they sometimes have more competitive rates. Credit union deposits are not covered by FDIC insurance but rather by the National Credit Union Administration (NCUA). The NCUA acts in the same way as the FDIC and provides the same level of insurance. Like the FDIC, NCUA is also backed by the full faith and credit of the United States Government.
Savings and Loans
A savings and loan, also referred to as a “Thrift”, operates much like a bank and offers a comparable range of products. Thrifts offer many of the same financial products as banks do but perhaps not as wide a variety. Deposits made to a thrift are covered by FDIC insurance if the thrift is a member, which most commonly are.
Banks
A typical bank offers a wide array of financial products including checking accounts, CD’s, savings accounts, money market accounts, and more. Bank deposits are covered by FDIC insurance. Thanks to technology, online banks are competing with physical bank branches. Sometimes, online banks may offer more competitive yields than a traditional brick and mortar bank due to the lower overhead.
Brokerage Accounts
A brokerage account is a type of account, which allows individuals to purchase a variety of investment securities such as stocks, bonds, mutual funds and other financial products. A brokerage account may either be with a full service brokerage firm or a discount brokerage firm. Be aware that non-deposit investment products such as stocks, bonds or mutual funds are not FDIC insured like bank deposits and thus are not guaranteed.
Safe Spot At Home
I would not encourage people to keep a large amount of cash on hand, but would suggest you keep some cash readily available in the event of an emergency. Several years ago my area was hit by an early winter storm knocking out power for several days. While I personally have an emergency fund, it was only accessible electronically. Without power, my fund was rendered useless as I had no access to it.