The Myth of 6 Months' Emergency Funds: Where to Actually Store It

You've probably heard it countless times: "Build an emergency fund of at least 6 months' worth of expenses." 

It's a financial mantra that's been drilled into our minds. But while the importance of having an emergency fund is clear, the question remains: where should you store it?

The Importance of an Emergency Fund

An emergency fund is your financial safety net, protecting you from unexpected expenses like medical bills, job loss, or car repairs. 

It provides peace of mind knowing that you have a cushion to fall back on during tough times.

The Dilemma: Safety, Interest, and Accessibility

When it comes to choosing a place for your emergency fund, you're faced with a three-pronged dilemma: safety, interest, and accessibility. 

You want your money to be safe from market fluctuations, earn some interest, and be easily accessible in case of an emergency.

Popular Options and Their Drawbacks

• Savings Accounts: While safe and accessible, traditional savings accounts often offer low interest rates.
• Fixed Deposits: These offer higher interest rates but come with a lock-in period, making them less liquid.
• Cash in Hand: While highly accessible, cash can be lost or stolen and doesn't earn interest.

My Personal Criteria for an Emergency Fund

For my emergency fund, I prioritize the following:

1. Safety: I want my money to be protected from market risks.
2. Interest: While I don't expect a high return, I want my money to earn something.
3. Accessibility: I need to be able to withdraw funds quickly and easily in case of an emergency.

The Importance of Accessibility and Safety

Your emergency fund should be easily accessible in case of unexpected expenses. However, it's equally important to ensure it's stored safely. Traditional savings accounts offer convenience but often come with minimal interest rates. Let's explore some alternatives that I personally use to store emergency funds:

1. Endowus Cash Smart:

Endowus Cash Smart

• Why I Love It: Endowus Cash Smart helps you access the best cash, money market, and short duration bond funds in the industry, at the lowest cost achievable, ranging from 3.4% to 4.6%
• Benefits:
• No lock ups
• Daily accrual on interest returns
• Cash fund that invests in institutional fixed deposits with one of Singapore’s best-performing money market funds.
• Risks:
• As Cash Smart is an investment product and not a bank deposit, it is not insured by the SDIC. 
• Cash Smart invests in funds. The funds have their assets ring-fenced by trustees and custodians (in the case of Cash Smart, the trustees and custodians are HSBC for Fullerton and Lion Global, and State Street for UOB Asset Management). You, as the investor, have a custodian as well (in our case this is UOB Kay Hian, Singapore’s largest broker).
• If you're interested in trying Endowus, you can use my referral link to sign up https://endowus.com/invite?code=QFMWH   

2. Chocolate Finance:

Chocolate Finance

• Why I Love It: Enjoy 4.2% p.a. return on your first S$20k and a target 3.5% p.a. on any amount thereafter.
• Benefits:
• Competitive interest rates
• Easy to use app
• See your returns every single day. No lock-ins, no complex criteria or hoops to jump through.
• Risks:
• As Chocolate Finance is not a bank, they operate as asset managers, they do not require SDIC insurance. 
• With Chocolate Finance, your funds are segregated and held separately by their trusted and licensed fund managers' custodians - HSBC and State Street.
• If you're interested in trying Chocolate Finance, you can use my referral link to sign up https://share.chocolate.app/nxW9/y321ds2r 

3. Maribank:

Maribank

• Why I Love It: Maribank is a digital bank that offers decent high-interest savings account of 2.70% p.a.
• Benefits:
• Interest credited daily
• No minimum deposit required
• No salary crediting needed 
• No minimum spending necessary
• Risks:
• Your deposits in the Mari Savings Account are insured (both principal and interest) up to S$100,000 in aggregate per depositor by Singapore Deposit Insurance Corporation (SDIC) in Singapore.
• If you are interested in trying Maribank, you can download MariBank app and use my referral code: 9QUL27KA

While the importance of having an emergency fund is widely acknowledged, the practicalities of where to store it can be a stumbling block. 

It's essential to find a solution that meets your specific needs and risk tolerance. 

Start by assessing your financial situation and determining how much you need to save. 

Then, explore different options and use the one that you are most comfortable with.

Remember, the first step is often the heaviest, but it's the one that sets the path for everything else

What are your thoughts about it?