The other day on our Credit Cards and Consumer Debt discussion board, Dilmatz (a.k.a. Daniel) asked a good question:
I set up a living trust last year, but I have not funded it yet. Silly, I know. I'm working on funding it now. My [emergency fund] is at ING Group
(NYSE:ING), in both a CD ladder and savings accounts, but they do not allow their accounts to be set up in a trust, so I need to move it. HSBC Holdings (NYSE:HBC)will let me put the accounts in a trust, so that's an option. I'm also wondering whether I should put the money in a money market account at Vanguard. My local credit union is also an option, but their rates are lower than online options.
So, I'm hoping to tap into this board's collective wisdom. Where should I stash [the money]? What should I consider when making that choice?
Daniel then posted an online poll, as anyone can do on our discussion board. Thirty-nine people responded, and 66% of them (26 votes) recommended the "online bank" option. Some 26% (10 votes) opted for "money market." Zero votes were garnered by "local credit union" (though that's often a great place to get good rates), while 5% (two people) said "somewhere else." As is a tradition among many pollsters in Fooldom, the fifth option was "the obligatory 'in your pants' option," and it received one vote (3%).
Perhaps more important than knowing where the best place to stash your emergency cash is, is actually having an emergency fund. Don't ignore it, or you may suffer considerably. When we assume that most people drowning under credit card debt are doing so because of reckless and irresponsible spending, we're wrong -- many people end up in dire straits these days simply because they lost their job temporarily or had a medical emergency or tragedy.
It's tempting to want to plow every extra dollar into stocks we expect a lot from, such as perhaps McDonald's
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