Here at YoungSmartSaveTravel.com not only are we about traveling for little money but we are also about smart financial decisions. Therefore, we always suggest everyone to keep an emergency fund.
What is a emergency fund you ask?
Well it is simple. An emergency fund is easily accessible money you have on hand in case of a financial emergency.
A financial emergency can include, job loss, medical emergency, surprise home repairs, car issues etc. You should keep anywhere from 3-8 months of expenses stored in your emergency fund depending on your job stability.
If you have an extremely stable job than 3 months of expenses should suffice. If your job is contract based or at an unstable company, then learning towards 8 months might be a smarter financial decision.
Calculating your expenses is simple enough. Just go through your monthly expenses and tally it up. Make sure to include, rent/mortgage, groceries, gas, car insurance, phone, internet, car loans, etc. Basically include the minimum you could survive on if you lost your job.
While you will probably qualify for unemployment in the interim, keep in mind you will have to find your own health insurance either through the ACA or pay for COBRA. So, a lot of your unemployment could be eaten up by health insurance.
Don’t worry if you don’t have 6 months expenses saved up yet. It is best to start out small. I recommend trying to save at least $1,000 to start.
Ok Now I have saved my 3 months expenses where should I keep it?
My mattress is pretty lumpy with all this cash…
Ok, ok. Never keep your emergency fund in cash but do keep it someplace very safe such as a savings account.
You also don’t want to invest your emergency money in the stock market. The reason being is stocks are very volatile in the short term and large downturns in the market are usually accompanied by large job losses. The last thing you want is the market to have a massive down turn and because of that you also lose your job. Since your emergency fund was invested in stocks, it also has taken a massive hit. Now you have no job, no monies and loads of problems. Yikes.
My bank account pays 0.01% interest in a savings account. Is this the best place to put my emergency fund?
This is an adequate place to put your money but it is not the best place. Sure it is safe place but you could potentially have thousands of dollars doing nothing for you.
Alright, smart guy..where do I put my emergency fund then?
Well, there a place that is 100% guaranteed such as a savings account but also pays better than .01% interest. (Ohhh, tell me more!)
We use Lake Michigan Credit Union, which pays an amazing 3% interest rate on their max checking account on account balances up to $15,000.
That’s right, your principle money is guaranteed because it is NCUA insured (This is FDIC for credit unions) and they will pay you a guaranteed 3% apy interest on that money (Up to $15,000). This gives the potential to make a guaranteed profit of $450, per year while at the same time keeping your money safe.
Ok AWESOME but I don’t live in Michigan.
That’s great. We don’t live in Michigan either. You can easily open an account online and if you don’t live in Michigan then to join you simply make a $5 donation to the ALS foundation, during the account opening process.
This seems too good to be true what’s the catch?
Ok there is a catch. To be eligible to receive the 3% interest you must meet 4 criteria.
1. Sign up to receive eStatments/eNotices.
This one is very simple. Set your account settings to receive estatments instead of physical mail. Who likes paper mail anyway?
2. Minimum of 4 logins per month.
This is super simple as well. Just log into their website or their app 4 times a month. You may think this is an odd requirement but the thought process behind it is people who use online banking are less likely to visit a branch and therefore saves the Credit Union money. This allows them to pay higher interests rates.
3. Direct deposit into your Lake Michigan Credit Union (LMCU) account.
This can also be handled very easily. LMCU is very loose on what counts as a direct deposit and there is no minimum amount of money. We set up an automatic transfer from a different bank account transfer $1.00 into our LMCU account and then a few days later withdrawal $1.00. This is a reoccurring monthly transaction so once we set it we never have to do it again. Pretty much any outside transfer count as a direct deposit, so a paycheck allotment, transfer from outside bank account, even a transfer from Venmo or PayPal count, and all it takes is a $1.00
4. 10 debit card transactions
Since this is a checking account, you will receive a debit card. You must make 10 transactions on this card per month to earn the 3.00% apy. Here at YoungSmartSaveTravel we think debit cards are worthless. We literally laugh at people in the check outline when they pay with a debit card because they could easily be earning valuable reward points with a credit card. (Ok we don’t laugh, that is mean, but we do shake our head and resist the urge to tell them our ways.) With that being said since we have to make 10 debit card transactions on this account so we better make sure they are very small amounts.
Easy methods we have done is buy 10, 50 cents amazon gift cards. It takes less than 5 mintues. Sure you eat into your profits by $5 but we would be spending it anyway. I mean, who doesn’t love Amazon?
Pay your internet or cable bill 10 times. Most cable/internet providers allow you to pay by credit card. We would just pay $1.00, 10 times, then finish the bill with a credit card. This only takes a few minutes a month. So totally worth it.
To make things easy on you… If you aren’t sure you meet all the requirements for the month, LMCU provides a handy tracker to tell if you meet the requirements. So, there is no second guessing yourself. Awesome.
Ok Ok, well that sounds great but I bet if you don’t meet all the requirements they hit you with tons of fees.
Nope, no fees, no minimum balances, no nothing. If you fail to meet the requirements of the month then you don’t earn interest for that month.
Lastly since the account does not pay interest on any balance over $15,000 then I recommend only keeping a maximum of $15,000 in the account at all times. Any money over $15,000 should be transferred elsewhere, and there are numerous online bank accounts that pay 1.00% apy with no requirements.
We hope you take these suggestions to heart and start saving for a financially secure future!
*We are in no way financial advisors, just two Millennials saving money to live financially smart and travel the world. Use your own discretion. We are not compensated by these companies for advertisement. We are loyal customers sharing our experience with you.