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Ask a Fool: High Yields on My Emergency Funds?

In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool One analyst Jason Moser takes a question from a reader who asks: "Where would a Fool keep emergency money in a time of low interest rates?" Jason talks about how investors need to view investment dollars and emergency dollars separately. An investor's priority with emergency funds is not yield; it's protection. The "yield" in this case is peace of mind knowing that your emergency funds are there when you need them.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 20, 2014, at 12:20 PM, chopsueycp wrote:

    Hey Jason,

    @carl_p here. What do you recommend as a good emergency fund amount to keep in minimal-yield cash? We currently have 9 months of expenses in an ING account making 0.75%, but I feel that is a bit conservative. What are your thoughts?

  • Report this Comment On July 26, 2015, at 3:59 PM, coffeedoc1 wrote:

    I designate the excess cash value in my blended whole life insurance policies to be my emergency fund. I can have the money sent to me in 5 business days (any more urgent need can be floated on a credit card until the Insurance check arrives and then paid off before interest accrues). If the emergency is of a short term nature, I can take the insurance money as a loan to be paid back after the emergency has passed (with a differential interest rate of only 0.7% between what the insurance company charges me and what they pay me on the cash value in my policy). If the emergency is permanent, I can take the money out of the policy as a withdrawal, which lowers the total death benefit a little but does not have to be paid back. Meanwhile, the cash value in my policy can never go down with the market and earns 3.5-6.34% (depending on the policy) per year, year in and year out while I am not having emergencies - beats any bank savings account or CD and even beats the safety and returns of most bond funds or even dividend funds (which often yield less than 3.5% and can go down with market fluctuations.) Safe, secure, liquid and has the added advantage of providing death benefit to my family. In my opinion it gives the ultimate peace of mind and is the perfect place to hold emergency fund money. coffeedoc1

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Jason Moser
TMFJMo

Jason A. Moser is an analyst for Motley Fool One. He finds stocks that make money and tells the world about them. He's also won a Buzzy. And an Awessie.

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