Liam advocates putting your savings into a credit union, just don't leave it where you have instant access, like your current account
Q: Liam, after a lot of effort, I’ve now reached my target emergency fund number, which is 3 months of my salary. Now that I have, where do I put it?
A: Good to hear you’ve accumulated three months of income.
The effort put in will be worth it, because if you suffer an income shock as a result of illness or redundancy or something unexpected comes up at home, or you need four new tyres for your car, you’ll be thankful of it.
The one place I wouldn’t keep it is in the same institution you operate your day to day banking from.
I’ve seen people make this mistake, because it’s all too easy when they’re running short to raid the emergency fund.
You need to remove the temptation of being able to make inter account transfers, but if you want to stay with the same bank, then lodge €1,000 into an account where you have immediate access and the balance into an account where you have to give seven or 14 days’ notice for a withdrawal.
My advice would be to lodge it with the likes of a Credit Union, or someplace you’d have to physically visit to make a withdrawal.
You don’t have to give notice to withdraw funds, but you’re making it difficult for yourself, nonetheless.
And that’s the key with an emergency fund account, you want access but not too easy access either.
And don’t spend any time worrying about interest rates, which some people do.
They don’t really matter when it comes to your emergency fund.
The account serves a very specific purpose.
You’re not putting it into an account to make money, if you earn any, it’s just a bonus.
Which means you don’t put it at risk, so any account you choose, must guarantee 100% of your capital.