The Case FOR Investing Your Emergency Fund
The Case AGAINST Investing Your Emergency Fund
Having money in a savings account is important for several reasons. In addition to giving you an easy place to store money, that money can be used to cover extra expenses and also to handle any emergencies that may come up. But when you start to save up an emergency fund, it can be tempting to choose a short-term savings account with higher interest rates.
You may be under the impression that saving money is saving money, and that interest rate you earn doesn’t matter. But there are some compelling reasons to consider leaving your emergency fund in a low-interest rate account.
You’re less likely to need the money: When you’re saving up your emergency fund, it’s important to stay open to the possibility that you’ll need that money. And remembering that you’ll need to access the money if an emergency comes up may be just enough motivation to divert that money to a savings account. Higher risk investments can seem more exciting, but they make it easier to lose sight of the underlying possibility of emergencies.