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Ask Dave

Daily and Monthly Interest

On a thousand dollars it doesn't matter what sort of account or interest rate you have. It's a rainy day fund, not an investment.

QUESTION: Autumn and her husband want to open a savings account to keep their baby emergency fund in. Some feature interest that accrues daily, and some accrues monthly. What is the difference?

ANSWER: The more often interest rates compounds, the more it comes. Most standard savings accounts are monthly, but with a baby emergency fund it doesn’t matter. This isn’t about making money, it’s about having a rainy day fund. It’s not an investment.