Great Accounts for an Emergency Fund

To prepare for a loss of income or a large, unexpected expense, the standard advice is to set aside at least three to six months’ worth of living expenses. But only 41% of U.S. adults have stashed away enough to cover just a $1,000 emergency, according to a recent Bankrate survey. Instead of tapping savings, 16% say they’d use a credit card, 14% would borrow from family or friends, and 7% would take out a personal loan.

An emergency fund in a dedicated account offers more freedom and less stress than a loan when you need money fast. If you keep the funds in a bank money market deposit account, it may come with a debit card or checks, providing easy access to your money. If you prefer a savings account, look for one that allows large, quick transfers of money to your checking account, says Ken Tumin of DepositAccounts.com. One way to achieve that is to open both a savings and a checking account with a single bank—transfers within an institution are usually immediate and free, says Tumin.

Whichever type of account you choose, look for one that doesn’t charge a monthly maintenance fee. If your account tacks on a monthly fee when the balance falls below a certain level, you may end up being charged if you make a big withdrawal. Ideally, the account will have a track record of offering a high interest rate and require a low minimum balance to earn interest.

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Saver-friendly accounts. Tumin recommends three online savings accounts that fit the bill. The Ally Bank Online Savings Account yields 1.6%, the Marcus by Goldman Sachs Online Savings Account has a 1.7% interest rate, and the SFGI Direct Savings Account yields 1.86%.

Among money market deposit accounts, check out the Sallie Mae Money Market Account, which comes with check writing and offers a 1.75% rate. Redneck Bank Mega Money Market yields 1.75% on a balance of up to $50,000 and offers a debit card and checks.