Where To Park Your Emergency Fund In 2023

While last year's rising interest rates may have been bad news for people trying to borrow money, they were a major boon for savers struggling to find a "safe" place to keep their emergency funds the last few years. Where you were probably lucky to earn 1% on your savings throughout 2021 and part of 2022, you can now find FDIC-insured accounts that are paying 4% or more.

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While that may not be enough to help you grow rich, earning 4% or more on your savings can definitely help you do more with your money in 2023 . However, you really do need to do some digging to find the best accounts to keep your emergency fund and other savings you have. After all, the Federal Deposit Insurance Corporation (FDIC) reports that the average savings account was still paying a paltry 0.30% as of December 2022. In the meantime, the average money market account was paying just 0.38%, and the average 36-month certificate of deposit (CD) was paying just 1.02%.

If you want to get the best returns on your emergency fund and other savings, you'll need to look away from traditional financial institutions and toward online banks you may have never heard of. Here's a rundown of all the safe places you may want to stash your cash, plus the rates they're paying as of early January 2023.

High-Yield Savings Accounts

High-yield savings accounts are one of the most popular options for emergency funds, and it's easy to see why. These accounts are FDIC-insured, meaning you have protection from bank defaults in amounts up to $250,000 per depositor and per account. Plus, you can access your money for emergencies at any time, and you can score a competitive yield that can change with market conditions.

Some of the best and highest-paying savings accounts right now come from a handful of online banks that don't have any brick and mortar locations. For example, SoFi Money has a very solid checking and savings account option, and a bank called UFB direct is offering a high-yield account with an exceptional APY over 4%.

I like the UFB Direct high-yield savings account because, like some others in this niche, it doesn't have any minimum balance requirements or monthly fees. As of early January 2023, this account is paying an APY of 4.11%, and you even get a free debit card.

Other high-yield savings accounts I recommend come from institutions like Western Alliance Bank, American First Credit Union, Third Coast Bank, and CIT Bank, to name a few.

Certificates Of Deposit (CDs)

Certificates of deposit (CDs) are also popular for emergency funds. After all, CDs offer a fixed return you can count on, although they require you to "lock up" your money for a set length of time. You can easily find CDs that last for one month to five years, and many people who use CDs for their emergency funds take out CDs in various terms so they have some funds reaching maturity every few months. If you do wind up having to cash out a CD early, you'll pay an early withdrawal penalty for doing so.

Similarly to high-yield savings accounts, the best CD rates come from institutions that you may have never heard of before. For example, you can find CD rates well over 4% for 12-month CDs from Great Lake Credit Union, Crescent Bank, and American First Credit Union.

Another good place for CDs is Marcus by Goldman Sachs. This online financial institution is currently offering a 12-month CD with an APY of 4.30%. A $500 minimum balance is required, but you can easily open this account online and start earning interest in a matter of minutes.

Money Market Accounts

Money market accounts work similarly to high-yield savings accounts, although they make your money more accessible by offering debit card access and/or check writing privileges. These accounts let you earn an exceptional return that may go up or down over time based on market conditions. They also make accessing your emergency funds easy if you need the money since they don't charge a penalty for early withdrawals like CDs do.

The best money market accounts are offering pretty decent rates right now that are similar to those offered by online savings accounts and CDs. For example, you'll find money market accounts with rates over 4.0% right now through institutions like American First Credit Union, UFB Direct, and Great Lakes Credit Union.

Series I Savings Bonds

Finally, you can consider stashing part of your emergency fund in a Series I Savings Bond if you know you won't need the money for at least one year. These bonds pay a pretty good fixed rate that changes twice per year, which is currently set at 6.89% for bonds purchases through April 30, 2023. However, you cannot access your money for 12 months and you'll pay a penalty of three months interest if you cash out your I-bond within 60 months (five years).

Series I Savings Bonds can be purchased in amounts up to $10,000 per person online, so a couple could easily stash away $20,000 per year with this strategy. Just remember that the rate on Series I Savings bonds adjusts twice per year, and it could go down next time rates adjust.

The Bottom Line

If you've been saving money in an account that earns almost nothing, now is a great time to move your money to a new bank or credit union. The rates are much higher now than they were in 2022 and especially in 2021, and many of the best accounts come with no minimum balance requirements and no monthly fees.

The biggest decision you have to make is in the type of account to open and which bank you want to go with. Fortunately, there are an endless number of options to choose from and new ones popping up all the time.

By Robert Farrington, Senior Contributor