Money Smart Life is fielding a money question today.
Is there such thing as saving too much money in an emergency fund? What’s the best place to keep the money you do save so it still earns you something while just sitting there?
Here’s the answer I gave over at Money Smart Life:
I suppose it’s possible to save too much in an emergency fund but it’s unlikely. If some dude gets in a car crash, would he have:
1) money for a new car in case their old one gets wrecked?
2) money for medical expenses?
3) money for living expenses?He’d be saving too much in his emergency account if he could cover all of these pretty easily. Unless they have that kind of dough stashed away, most people won’t have to worry about saving too much in their emergency account.
As always, consult a financial adviser before making your decision.
It’s highly unlikely anyone can save too much money into their emergency fund. There are a lot of freak accidents that can occur and they can get pretty expensive.
As far as where to keep it, I recommend a high-yield money market account. I like ING Direct. You can get a bit of interest paid on your money and you won’t get any penalties or extra taxes for withdrawing the money.
Visit Money Smart Life and leave a comment if you want to throw in your 2 cents.
Money Question - Can You Save Too Much in an Emergency Fund? [via Money Smart Life]
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