Is your rainy day fund under the mattress? Financial experts recommend that we all keep an emergency fund equal to at least three months of expenses. But the best place for it isn’t your sock drawer but a high-interest account that combines security with liquidity. So what are the best accounts and how can they grow your emergency fund?
1. Current account
This is your basic bank account and if you’re looking for liquidity, this is the pick of the bunch. Your current account lets you access your cash through withdrawals and debit cards, but there’s a catch.
Interest rates are virtually invisible, meaning that you offset access against virtually zero growth for your money. And keeping an emergency fund alongside your daily cash is a recipe for disaster.
2. Savings accounts
If you want to grow your emergency fund in a savings account, shop around for the best deal. Online banks often specialise in higher interest rates, so if you’re happy to leave your fund to grow this could be the right option for you. And if you’ve accumulated a healthy balance you may get preferential rates.
3. Money market accounts and funds
These types of financial products can deliver a real boost to your emergency savings but will often come with strings attached like limited withdrawals or minimum account balances.
Your best bet may be to investigate money market funds which are highly liquid and also extremely low risk. After all, you don’t want to lose your emergency fund in a risky investment. When you’re looking at more complex financial products, always ask the advice of an independent financial adviser (IFA) first.
4. Independent financial advice
Once you start looking beyond basic savings products, you might be wise to seek the advice of an IFA. Look for a company that’s lean and agile and uses software for IFAs to handle their business management systems. Intelliflo provide software for IFAs that let them focus on opportunities to grow your fund.
A fully independent adviser will be able to inform you of high performing products that aren’t on the high street, tailoring them to your specific needs. That way you can grow your emergency fund knowing you have the right blend of high-interest rates, secure investment and access to your cash when you need it.
