Splitting an emergency fund between banks or other financial entities is good practice, and I do this with two banks and one credit union for redundancy/security should one institution have an outage or service interruption. Your other ‘sorta emergency’ fund that has gone to house items (maintenance/repairs) should be accounted for in a regular budget as a budget item. That could be established as an even separate account based upon frequency of withdrawals.I'm sure this sounds very stupid to some of you but this is the situation I'm in.
You should have immediate liquidity between two insured institutions for the true ‘must spit out cash now’ kind of emergencies. If your employer allows for multiple direct deposits, this makes it easy. Simply decide on a small amount to deposit from each check every pay period. When I was working, I had three direct deposits. One deposit for $300 to the secondary bank, then $75 to the credit union, and the remainder to the primary bank. It does not get any easier than that.
For the lumpier expenses, I would invest in other higher yielding instruments that others have suggested, and then either park that into a settlement fund earning a good rate or pick a treasury MMF as these would not be tapped too often. If the low paying bank funds outgrow the must have cash, then direct the overflow to the settlement fund or treasury money market.
Having the bulk of funds that can be transferred to the primary bank within a couple of days in higher yielding assets makes sense but keep enough immediately liquid cash in the bank. I would avoid instruments that require penalties, fees, lengthy transactions, paperwork, or process delays to ‘break the piggy bank.
Statistics: Posted by Hacksawdave — Sat Jun 08, 2024 5:29 pm