As the title says I am trying to see where people stand on this. Obviously this is all personal preference. But that is what I am after.
After depleting our savings when buying our apartment 2 years ago, we’re about to cross 6 months liquid savings in just plain old savings account with ability to immediately withdraw money.
(To clarify that is 6 month assuming 0 income, which is very unlikely given the social system of our country - so realistically we have even more in savings.)
As you can imagine, the interest in this account is not great, so I want to set a limit as to when we stop dumping every spare penny into the savings account and begin doing other things (likely try to invest).
It depends on what alternatives I have available. Prior to this year, I was aiming for 3-6 months of liquid savings and the rest in my investment accounts.
Now that reasonable interest rates are available, I have changed my priorities. My goal now is 2 months savings in my checking account. This allows me to cover nearly any expense that comes up without the annoyance of transferring money to cover it.
I keep another 1-2 months of expenses in a MMF earning >4% interest and immediately available for withdrawal.
Then I have a decent amount (no particular target) invested in a short-term treasury ETF (TFLO) earning >5% interest, but it takes about a week to sell and transfer funds if I need it.
Altogether, I’m probably keeping 6-12 months readily available, but most of it is earning interest now. I would also likely get 3-6 months severence if I lost my job and could probably cut back on some expenses to stretch things a bit further.
Finally, I used to contribute to a Roth 401k (I’ve since switched to traditional 401k), so I should be able to access those contributions without penalty, if needed. This would only be relevant for someone in the US though.
You may be interested in switching your checking to a brokerage like Fidelity or Schwab. Some benefits:
- at least at Fidelity (haven’t checked Schwab), your checking can be invested in a money market fund - mine gets >4% interest
- access to your Treasury ETF much sooner
- Fidelity and Schwab refund intentional ATM fees (depending on account type)
Basically, you’d get better interest in your checking and fewer accounts overall.
I switched late last year and I love it. My structure is:
- Fidelity Bloom Spend - main checking, core is SPAXX, only has 2-3 weeks spending money
- Fidelity Bloom Save - main savings, core is SPAXX, and has ~1 month spending money, plus Treasury bills that make up the rest of my efund
- Fidelity Cash Management Account - usually near $0, but I’ll load it with some cash when I travel so I can use the free international ATM feature as needed, core is a basic savings at ~2.5%
SPAXX gets just under 5% right now, and it’s nuts that I’m getting that in my “checking.”
