Where to Stash Your Emergency Fund for The Best Rates and Security

Where to Stash Your Emergency Fund for The Best Rates and SecurityYou no doubt already know the importance of setting aside money for emergencies, but with regular savings account interest rates so low today, it may seem like you may as well keep your money under your mattress. There are, however, better options.

My Money Blog highlights three alternatives to the dismal returns of typical online checking and savings accounts: rewards checking accounts, long-term CDs, and US savings bonds.

We've mentioned rewards checking accounts before as an alternative to high-fee banks. You have to meet certain requirements every month, such as several credit card transactions and bill payments, and typically the high interest only applies up to a certain balance, but the interest is very attractive. My Money Blog offers the example of Consumer's Credit Union's Free Rewards Checking account, paying 4.09% APY on balances up to $10,000; there's a $5 application fee. I use a rewards checking account through my local credit union. You can find other rewards checking accounts at DepositAccounts.

Long-term CDs, the writer suggests, may be good for some of your emergency funds if you have a large cushion, even though current 5-year CDs are paying 1.74% APY, e.g., at Ally Bank.

And U.S. Series I Savings Bonds are earning an attractive 3.06% right now for the first six months, but will have an unknown rate after that, based on ongoing inflation. My Money Blog says the I Series bonds will still earn more than 1-year bank CDs even with zero-percent inflation.

These are safe places to park your money that you're saving in case something bad happens—while still maximizing interest. For more details on these types of investments, check out the full post, or share your own thoughts and emergency fund strategies in the comments below.

Cash Reserves and Emergency Fund Update: Q1 2012 | My Money Blog

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