Where to Keep Your Emergency Fund

Corey —  September 11, 2009

       If you realize you need an emergency fund and you’re ready to get started, the first thing you need to do is figure out where you’re going to keep it. Will you stuff it in your mattress, put it in a savings account at your local bank or credit union, or open a high-yield online savings account?

The Problem with Your Mattress or Local Bank

       Inflation will eat away at the value of your emergency fund unless you’re earning enough interest to beat it. The problem with keeping your emergency fund under your mattress or in your local bank is that they don’t provide enough interest to beat inflation. You’ll get no interest from your mattress, and banks are notorious for savings account interest rates of 0.05% (maybe 0.50% if you’re lucky). If you want to earn a decent amount of interest, you’ll have to look elsewhere.

Consider a Credit Union or High-Yield Online Savings Account

       Credit unions and online banks offer far higher interest rates than banks. And online banks often offer a higher interest rate than credit unions. If you are able to join a credit union, find out what kind of interest rate they offer. Then, compare it to an online savings account to find the best deal.

I Recommend ING Direct’s Orange Savings Account

       My wife and I have our emergency fund and all of our short-term savings with ING Direct in their Orange Savings Account. I highly recommend ING Direct to my family and friends, and I strongly encourage you to consider using them for your emergency fund. ING Direct has all the features you’d normally expect including automatic transfers, free electronic transfers, and free bill pay. I have five specific reasons I recommend them over everyone else:

  1. Customer Service – ING Direct is known for its excellent customer service. You can quickly reach a knowledgeable Associate by calling their customer service number (1-888-464-0727). They’re available 7 days a week from 8 AM to 8 PM (EST). I’ve always received friendly, prompt, and helpful service from them. I’ve always talked to a real person in less than a minute when I called.

  3. Easy to Use – ING Direct has a simple user interface with plenty of help available if needed. It’s straightforward and easy to learn. And if you ever get stuck or have a question, you can get help quickly by calling their customer service number. (And you won’t be stuck waiting for 20 minutes to talk to someone.)

  5. Consistently High Interest Rates – ING Direct is consistently among the highest interest rates in online savings accounts. They don’t always have the top rate, but they don’t bait you in with a promotional rate and then rip you off later. I like knowing that I’m getting a competitive rate all the time.

  7. Security – When you sign up for a savings account with ING Direct, you’ll see why they’ve received top marks for their security features. They are one of the most secure banks you can use. They take security seriously and it shows. The New York Times had a piece showing that ING Direct has the lowest rate of identity theft among the top 25 banks in the U.S.

  9. Multiple Accounts – It’s very easy to open multiple savings accounts at ING Direct. A couple clicks and you can have an account specifically for your insurance bill. You can then set up automatic transfers to that account so you’ll be ready when that bill comes. I have an account specifically for our heating oil bill because we only pay it in the winter and it comes in large chunks ($400-600 a bill). This is a very useful feature for budgeting and segregating your savings so you can see your progress toward specific goals.

Opening an Account at ING Direct

       Opening an Orange Savings account at ING Direct is very easy. Go to their website at www.ingdirect.com and click “Open an account”. Then click “Orange Savings Account”.

Orange Savings Account

       After clicking the “Open Now” button and reading the instructions, you’ll be taken to their short application. It should take you less than 5 minutes to fill out all the forms. You’ll just need to have your checkbook handy so you can link your ING Direct account to your checking account.

Orange Savings Account Application

       In one or two business days, you’ll receive two small deposits in your checking account. Log in to ING Direct to confirm those deposits, and then you’ll be able to withdraw from ING to your checking account. They’ll let you deposit to ING from your checking account even if you haven’t confirmed those deposits.

Free Updates!

       I’ll talk more about how much you should save in your emergency fund, ways to build it up, and when you should use it. If you don’t want to miss that information, sign up for free updates to Provident Planning!



Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.