The Emergency Fund Is Separate

Faith asks if she should keep her emergency fund in a separate checking account. Dave says it needs to be in a different account of some kind.

QUESTION: Faith on Twitter asks if she should keep her emergency fund in a separate checking account. Dave says it needs to be in a different account of some kind.

ANSWER: Well, it needs to be in a separate account of some kind. You could put it in a savings account. It's not going to earn a ton. If you want to get a little bit fancier about it, you could put it in a money market account with check writing privileges, but it does need to be kept separate. The reason is you'll just accidentally spend your emergency fund one day. It's just freaky how that happens. You've got to stop that from happening. I have to trick myself, so I have my emergency fund kept completely separate from everything else. No other savings is mixed with it. No other investing is mixed with it. That way, it's very clear if we have an emergency that's so large that we have to tap that account. Wow, something big happened. It's a real emergency.

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