Can You Grow Your Emergency Savings Quickly?
Your emergency savings will grow steadily with each contribution that you make. But is there a way that you can speed up the process? There are several savings tools that can help you grow your savings quickly.
High-Yield Savings Account
A standard savings account will have a small interest rate attached to it to encourage your balance to grow. That interest rate will only make your balance inch a little higher as time goes on. The annual percentage yield will likely be lower than 1%.
If you want to reach your savings goals faster, you should add your emergency savings to a high-yield savings account. A high-yield savings account will have a higher interest rate than a standard savings account and, in tandem, will have a higher annual percentage yield. You can expect an APY between 3-4% with this option.
Money Market Account
A money market account offers similar growth rates to a high-yield savings account. You can expect to have an APY between 3-4% when you put your emergency savings into this type of account.
A money market account is an exceptional choice for emergency savings for reasons beyond its high-interest rate. A money market account offers features similar to a checking account. You will be able to withdraw your savings with the help of a debit card and/or a checkbook. So, you will have the option to use your emergency savings through multiple methods: debit card, written check, cash withdrawal or electronic money transfer. This level of accessibility will be convenient when you’re dealing with an urgent expense.
Certificate of Deposit
A Certificate of Deposit is another savings tool that comes with a higher APY rate than a standard savings account. Typically, you can find CDs with APYs between 3-5%. So, you can clearly use this option to grow your savings quickly.
But you shouldn’t make the mistake of putting all of your emergency savings into a CD. It’s better to split it between a high-yield savings account or MMA and a CD.
Why? A CD isn’t meant to be accessible. It’s supposed to lock away your funds for a set term, allowing them to grow untouched. Accountholders are not meant to access those funds until the account is fully matured.
If you make this mistake, you might not be able to access your emergency savings when you really need them. After all, you can never predict when an emergency expense will arise. If you try to withdraw the savings before the maturity date, you will have to pay an early withdrawal fee — this could undermine the savings that you’ve tried to reap with this account.
In this scenario, you could sabotage your CD, or you could look into an alternative payment method. Not having accessible savings is one of the many reasons why people get online personal loans for emergency expenses. If you don’t have access to enough savings to cover an emergency expense right away, you could try applying for an online personal loan as a solution. As long as you are eligible, you can fill out an application in minutes. Soon after, you’ll find out your approval status. With an approved loan, you could resolve your emergency quickly and manage a repayment process afterward.
So, you should only add a portion of your emergency savings into a CD account to reap fast growth without losing all access to your safety net. You could divide a portion of your savings into multiple CD accounts — this is called a CD ladder. This strategy can build up your savings across several term limits.
These savings accounts can help you grow your emergency savings faster. Choose one (or more) of them to speed up the process!