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Ask Dave

High-Yield Savings Account

Matthew wants to know if Dave recommends a certain type of account for the emergency fund.

QUESTION: Matthew on Twitter wants to know if Dave recommends high-yield savings accounts for an emergency fund.

Dave's ANSWER: As long as it's fully liquid. That means you can get the money out without a penalty for early withdrawal. If you get a penalty, your transmission will go out the next week and you won't want to get hit with the penalty, so you'll borrow money for your stupid transmission. That's a bad idea. As long as it's liquid, I use high-yield money market savings accounts all the time.