Forget Savings Accounts for Emergencies. Open This Account Instead

Got emergency savings? A lot of your fellow Americans don’t — according to research by The Motley Fool Ascent, just 45% of us could cover a $400 emergency from our savings or checking accounts. Even if you’re among that 45%, you would likely sleep better with even more money saved for emergencies — and you need that money in the right bank account.

Your emergency fund needs to be accessible at all times so it can get you out of jams like an unexpected medical or auto repair bill, or even a period of joblessness. While you want some kind of dedicated bank account for this money, a savings account may not be your best option.

In fact, a money market account (MMA) could be an even better fit. They’re like a cross between checking and savings accounts, with the features of both. Let’s take a closer look at MMAs — and see when the humble savings account may be a better place for your emergency fund.

Enjoy easier cash access

When you need to access your emergency savings, every minute counts. With a savings account, you’ll likely need to transfer the money to another account to take it out. But money market accounts come with debit cards and often check-writing privileges, just like checking accounts do.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info Circle with letter I in it. See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Member FDIC.	APY 4.25% Rate info Circle with letter I in it. See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.25% Rate info Circle with letter I in it. 4.25% annual percentage yield as of August 24, 2024 Member FDIC.	APY 4.25% Rate info Circle with letter I in it. 4.25% annual percentage yield as of August 24, 2024	Min. to earn $1
UFB Portfolio Savings Account APY 5.15% Rate info Circle with letter I in it. To ensure you keep getting the highest rate at UFB, you’ll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts. Member FDIC.	APY 5.15% Rate info Circle with letter I in it. To ensure you keep getting the highest rate at UFB, you’ll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts.	Min. to earn $0

This one-step money access can make a money market account an excellent place to keep your emergency fund. If your car’s at the mechanic and you have to pay for new coil springs (keep a car for 15 years and see what breaks — you’ll be surprised), covering the bill can be a piece of cake when you whip out a debit card.

Grow your money with a high APY

Remember when I said that money market accounts are like a cross between a checking and a savings account? Well, here’s where the savings account features come into play. Namely, money market accounts pay comparable APYs to high-yield savings accounts, especially if you open one with an online bank.

The best money market accounts on our radar all pay more than 4% APY (with one exception). You can enjoy that easier cash access while watching your money grow with interest. It’s like the best of both worlds!

When is a savings account the better option?

All of these features sound great, right? Well, not so fast. If the money market account you’ve got your eye on has a high required minimum balance, you might not have enough cash on hand to open it.

Plus, some money market accounts might also offer different APYs for different balances, which could be a problem if you’re starting with a small amount of money. If the advertised 4.30% APY on a money market account is only for balances over $50,000, but you can open a high-yield savings account paying 4.30% even with an opening balance of $0, opting for the savings account is a smart move.

Another point in favor of high-yield savings accounts is that some of them come with cool features like savings buckets. This lets you create separate sub-accounts to save for different goals. If you’re hoping to build not just an emergency fund but also a vacation fund and a new car fund, managing these separate goals within a money market account might be difficult.

Ultimately, the choice is yours — it’s your money, after all. But if getting easier access to your emergency fund while also enjoying a high APY sounds good to you, consider opening a money market account.