Choosing the Emergency Fund Account Type That’s Best for You

by Caramel World Traveler

[This is a Guest Post By Shay Olivarria and will be part of our monthly series entitled The Money Curve: Lessons in Financial Intelligence with Shay Olivarria]

Making sure that you and your family have enough access to cash is on everyone’s mind right now, as it should be. Each of us needs to contribute funds to an “emergency account” that will provide the cash we need when one of life’s many surprises arrives. Having an account earmarked for those surprises will save us from having to borrow from our families and friends as well as save us from visiting our local quick cash establishment. For those of you that have read Money Matters: The Get It Done in 1 Minute Workbook you know how I feel about those places.

This month we’re going to talk about which type of account is the best one to store your emergency cash in. Each situation is unique and there is no one-size-fits-all answer. There are 3 main types of accounts that should be considered to store your emergency cash.

Savings accounts are accounts that are opened at a credit union or bank. They typically offer the customer very low interest rates and are easily accessible. Funds can be withdrawn through the credit union or bank using a teller or ATM. You can take out as much money as you want whenever you want. Having that much access is one reason why many people don’t see their savings accounts grow. You have to have great willpower to stop yourself from using the emergency money for non-emergencies.

Break Piggy

Don't Starve the Piggy. Feed the Piggy.

Money Market accounts are accounts that are opened at a credit union or bank. They typically give a little bit higher interest rate and are a little bit less accessible. The goal of this type of account is not to make money so much as not to lose any money. Funds can be withdrawn through the credit union or bank using a teller, check, or ATM, however there is usually a limit on the amount of withdrawals you can take every month without a penalty. Having this restriction often helps to stop people from withdrawing money.

Certificates of Deposit (CDs) are accounts that are opened at a credit union or a bank. They typically have the highest interest rate of the 3 types of accounts mentioned, however they also have the most restrictions. These accounts “lock in” the money you contribute, and how long the funds must remain “locked” as well as the interest it will pay out. Taking the money out earlier than agreed will trigger penalties. Make sure you understand all the requirements and restrictions to your funds when using these accounts.


  • Choose an account that will provide easy and quick access to your money.
  • Make sure you know how to get your money out when you need it.
  • Understand what the interest rate is, how it’s calculated, and what, if any, penalties there are for taking your money out.

At the end of the day only you know which account will work best for you. Make sure to understand what your behaviors are and how much access you need to feel comfortable. Having an emergency account is, arguably, the single most important aspect of building wealth. If you have a financial cushion you’ll be more confident and able to make choices from a position of power instead of a position of helplessness and weakness. Manage your money well. Be well.

About Shay:

Shay Olivarria

Shay Olivarria

Shay Olivarria is a motivational speaker, financial literacy coach, former foster care youth and author of Money Matters: The Get It Done in 1 Minute Workbook. As an ambassador for financial freedom, Shay travels all over the country to educate people on responsible financial decisions. She has partnered with several community organizations including Independent Lens, San Diego State University’s African Student Union, Promise House of Dallas, Texas, Los Angeles Urban League, San Diego Urban League, and the Latino Student Business Association of the University of Southern California.  For more information on Shay go to


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