Trees crashed onto parked cars, area restaurants shut down, and residents rushed local gas stations for fuel and ice.
I was without power for two long, hot, one hundred degree days.
My neighbors were without electricity for three times as long.
And get this, in some neighborhoods, the Internet didn’t work. Eek!
We were in a true state of emergency.
Catastrophic events can happen in a matter of seconds.
If you’ve saved the almost universally recommended three to six months of living expenses, you’re probably in good shape to deal with surprise expenses. Then again, depending on where you stored the money, it may or may not be easily accessible.
A lot of people attempt to milk as much interest as possible out of their cash reserves. They can’t bear to watch a large chunk of money produce miserably low returns in a simple savings account. As a result, they’re too eager to put their financial safety net at risk in volatile investments, e.g., stocks, bonds, precious metals.
Emergency savings belong in a bank where they’re safe and available for, ya know . . . emergencies.
Yes, over time, inflation will nibble away at your money’s buying power, but that’s fine. When the unexpected happens, your cash isn’t trapped in a mutual fund that’s tanked in value because the European Union can’t decide whether to bail out Greece or kick it into the Mediterranean Sea.
You can even make a strong case for hiding a few thousand bucks in your home.
During a natural disaster, like the one mentioned, ATM machines might stop working.
For more predictable emergencies such as falling ill, losing a job, or getting in an auto accident, you can keep things a little less 20th century. A checking, savings, or money market account in an FDIC insured bank should do the trick.
Of course, some institutions will give you more bang for your buck than others. All else being equal, you should opt for the account that pays the highest interest rate.
In an upcoming post, we’ll discuss how to find the best bank account offers. But considering where rates are on interest bearing accounts these days, try not to get your hopes up too much.