Save for Emergencies in a Low Fee Bank Account
Build Your Emergency Fund With A High-Yielding Savings Account
10 options with low fees and minimal initial deposits
iStock / Getty Images One of the foundations of financial planning is having an emergency fund — enough money to cover a new set of tires, a root canal or a period of unemployment without going into debt. To create an emergency fund, you’ll need a low-cost savings account, preferably one that will help you save automatically. Many Americans live on the financial edge: A 2019 analysis of data by Bankrate.com found that 56 percent of households had no emergency savings account. A 2019 report from the Federal Reserve found that 4 in 10 people couldn’t pay an unexpected $400 expense with cash, savings or a credit card charge that could be quickly paid off. Furthermore, those in low- and moderate-income households often see big income swings during the year, meaning that sometimes even routine expenses can be hard to afford without savings to fall back on. 29 percent of people who do have an emergency fund keep it in cash hidden at home. Although that’s good for late-night emergencies, a wad of cash in a coffee can is easy to steal — or to lose in a disaster, such as a fire or tornado. For most people, the best place for an is a no-fee or low-fee bank account with no withdrawal penalties. The account is insured by the federal government, and you can make withdrawals in person or via an automated teller machine. Keeping an emergency fund at a bank can have an added advantage: The bank can move money to the emergency fund automatically at regular intervals and help you build a cash stash. Although wealthier families use these accounts, those with less income often do not. One reason is the fees: Keeping $300 in a bank account with a monthly fee of $5 to $10 could mean paying $60 to $120 a year while earning trivial amounts of offsetting . Some accounts want $2,500 or more as an initial deposit. You don’t have to go to a bank office to start your account. You can open an account with a laptop or even a mobile phone. If you register your account information with the Internal Revenue Service, you can get your income tax return much quicker than you would with a paper check. (And you won’t have to pay any fees to cash the check). The accounts below are the highest-rated bank accounts with minimum initial investments of $100 or less, according to DepositAccounts.com. Some have no minimum investment requirements at all. High-Yielding Savings Accounts That Cost Less Than $100 To Open
These accounts have low fees and low minimum initial deposits, provided you agree to regular automatic transfers from an associated checking account, according to the Consumer Federation of America. Minimum opening deposits with APY* (listed in descending order by number of branches) $1, 3.11% Dollar Savings Account, DollarSavingsDirect (division of Emigrant Bank) $0, 3.11% UFB Elite Saving, UFB Direct (division of Axos Bank $50, 3.05% Money Market Savings, Merchants Bank of Indiana $1, 2.85% Online Savings Account, ValleyDirect (division of Valley National Bank) $100, 2.85% High-Yield Savings, LendingClub Bank, N.A. $100, 2.80% Cornerstone Money Market Savings, Vio Bank (division of MidFirst Bank) $100, 2.70% Savings Connect, CIT Bank (division of First-Citizens Bank & Trust Company) $0, 2.70% Personal Savings, Prime Alliance Bank $0, 2.50% Money Market, Sallie Mae Bank $0, 2.45% High Yield Savings, Synchrony Bank Data as of 10/13/2022 from DepositAccounts.com. *Annual percentage yield How to start an emergency fund
typically recommend having three to six months’ worth of living expenses — not salary — in an emergency fund. For most people, that’s an intimidating amount. Your best bet is to simply start an emergency fund with whatever you have and add to it regularly. One easy (and traditional) way to start is to save the change in your purse or pocket. Many banks will count it for free, and it doesn’t take long to get up to $25 — enough to start an emergency fund at some banks. Another way is to save part of your . The IRS says the average tax refund in 2020 was $3,039. If you put half ($1,519.50) in the bank, you’d have a good start on an emergency fund. Add $50 a month, and you’d have $2,120 after a year. If you have the time and ability, a side gig is a good way to jump-start an emergency fund. Bringing in even a small amount of can put you on a path to saving. Cutting out recurring charges, such as internet services you don’t use anymore, is another way to get money for savings. And always look for banks or credit unions with low or no monthly fees. When you’re starting out — or even if you’ve been saving for a long time — every dime you avoid in fees is a dime in your pocket. Make sure that the bank doesn’t levy a charge to withdraw money either. More on Building Your Cash Reserves
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