Establishing an emergency fund

One of the very first steps of financial planning is to establish an emergency fund which is an asset that you can use for “unexpected expenses” or short to immediate term financial goals. The rule of thumb is to save at least three to six months of your normal expenses or more depending on your job security and other financial factors.

Your local bank, credit union is the first place to start your research for obtaining the best yield on your savings. Many financial institutions will offer upward to 3 % for the first $10,000 to $15,000 in savings or even checking accounts.

To do a bit of comparison shopping I would also suggest you check out bankrate.com website for local as well as national rates that financial institutions are currently paying including online banks. You can also find rates on mortgage and car loans on their website.

Money Market Fund rates are extremely low at the moment paying less than 0.03 % in most cases, CD’s are not much better unless you are willing to tie up your money for three to five years and even then the rates they pay are pretty low.

My favorite choice has been the US Savings Bond, specifically the I Bond. This bond re-adjust its rates every six months based on two financial indicators. Currently the rate as of May 1st is zero percent, so I suggest you hold off and wait until November before making any purchases. Historically this I bond has paid higher yields than most other savings accounts including one year CD’s.

Next week’s post I will go into greater detail on the ins and outs of buying US Savings bonds so stay tuned till next week. Until then have a great week.

Daniel Iuculano, AAMS CMFC

Accredited Asset Management Specialist

Chartered Mutual Fund Counselor