Q: I am in the process of building an emergency fund. With saving rates at banks so low, where should I place this money but still have access to it if an emergency arises?” —Stephen Pintar
A: Even though rates are low at banks and credit unions, keeping emergency funds in an easily accessible FDIC-insured savings or money market account is still your best move.
“The most important elements for an emergency fund are liquidity and safety, not return, so don’t take risks to earn more or sacrifice liquidity,” says Ann Arbor, Mich., financial planner David W. Shotwell.
For the best rate of return, look into online banks, which typically have the most competitive rates. MONEY’s latest Best Banks report recommends MySavingsDirect’s High Interest Savings account, which pays a return rate of 1.1% and has no maintenance fees.
MONEY recommends an emergency fund that holds three to six months’ worth of money needed to cover all non-discretionary expenses (such as food, housing, and health insurance). Once you’ve set that aside, you can then move the excess out of your emergency fund and into an investment portfolio to reach for a higher rate of return.