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Are Online Banks a Good Place for Emergency Funds?

In this segment of The Motley Fool's all-financials show Where the Money Is, Fool financial analysts Matt Koppenheffer and David Hanson take a question from a Fool reader on Facebook who writes, "Are online banks a good place for keeping emergency funds? Or is keeping it in a bank savings account or checking account better?"

The guys discuss why entirely online branchless banks like Bank of Internet (NASDAQ: BOFI  ) or Capital One 360 (NYSE: COF  ) make perfectly safe and sound alternatives to traditional banks and the importance of liquidity when planning an emergency fund.

Why this trend could change banking forever
Do you hate your bank? If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.


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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 July 26, 2015, at 3:53 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 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% 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 is the perfect place to hold emergency fund money. coffeedoc1

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Matt Koppenheffer
TMFKopp

Matt is the Managing Director of The Motley Fool GmbH, The Fool's German business. Besuch uns bei Fool.de!

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