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Build the fund · Lesson 7 of 10

Where to Keep Your Emergency Fund: Safe and Reachable

Learn the three needs of an emergency fund home: reachable, covered by deposit protection and kept apart from everyday spending.

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THE WRITTEN LESSONFollow along at your pace

Where you keep your emergency fund matters almost as much as how big it is. This lesson shows three simple needs, the places to avoid and why a low interest rate is part of the deal.

Three needs

Your fund belongs in cash you can reach within a day or two, in an account covered by a government deposit protection scheme, and apart from your everyday spending. Keeping it apart also lets you see at a glance whether it is full.

Three yellow cards. The first shows a clock face and says Reachable in a day or two. The second shows a shield with a tick and says Deposit protection. The third shows two jars, Everyday and Fund, and says Apart from everyday money.(opens the full-size picture)
Reachable, protected and apart: the three needs.

What deposit protection means

Deposit protection means that if a bank fails, your savings are covered up to a limit. Each country runs its own scheme with its own limit, so check your own country’s scheme and what it covers. This lesson does not list limits, because they differ and change.

Be careful with apps that hold money. An app is not always a bank. Check that the app itself is a covered bank, not just a partner of one, because a partner’s cover may not protect you if the app company fails. If you hold more than one account at the same bank, ask whether they share a single limit.

A bank building next to a shield with a tick and the label Covered up to a limit. Below it a globe is labelled Check your country's scheme, and a phone is labelled Is the app itself a covered bank?(opens the full-size picture)
Cover has a limit, differs by country and needs a check.

Where not to keep it

Three places do not suit an emergency fund.

  • Investments. They can fall just when you need the money. Money you will need soon belongs in savings, not investments.
  • Cash at home. It can be lost or stolen, it has no deposit protection and it earns no interest.
  • Accounts you cannot get at quickly. A lock has a cost when the bill arrives next week. Locks suit goals you have chosen to commit to more than they suit emergencies.
Three yellow cards, each with a red cross over its picture. A falling line chart is labelled Investments, a house with a banknote is labelled Cash at home, and a padlock is labelled Locked accounts.(opens the full-size picture)
Three places to avoid for emergency money.

The price of safety

Easy-access savings accounts usually pay low interest, and inflationinflation: A general rise in the prices of goods and services over time, so that the same amount of money buys less. Returns are often reported after inflation, in real terms, to show what a gain is worth in buying power.Full entry in the glossary can eat into that interest over time. That is the price of having the money there on a bad day. You are not trying to grow this money. You are keeping it ready. Money you will not need for years is a separate decision, and it is best made with a qualified, regulated adviser.

An upward arrow labelled Low interest beside a loaf of bread with a dashed outline showing a missing slice, labelled Inflation. A yellow label says The price of safety, and a smaller one says Money for years later: a separate decision.(opens the full-size picture)
Low interest and inflation are the price of safety.

Check your rate

Loyal customers can lose out on savings too. A UK competition review included cash savings among the markets where long-standing customers paid or earned worse deals. So check your rate now and then, and compare it with what is on offer today. If you move, keep the quick access you need.

Two price tags, Lower for Old account and Higher for Today's offers, beside a calendar page reading Check rate. Two yellow labels say Check now and then and Keep the quick access.(opens the full-size picture)
A calendar reminder keeps your rate from going stale.

This page gives general information, not financial advice, and it names no banks, apps or products.

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Read the full lesson script

In this lesson, you'll learn where to keep your emergency fund, so it's there on a bad day.

It needs three things. Reachable within a day or two. Covered by a government deposit protection scheme. And apart from your everyday spending, so you can see at a glance whether it's full.

Deposit protection means that if a bank fails, your savings are covered up to a limit. Each country runs its own scheme with its own limit, so check yours. And check that an app holding your money is a covered bank itself, not just a partner of one.

Where not to keep it: not in investments, which can fall just when you need the money; not as cash at home, which can be lost or stolen; and not in an account you can't get at quickly.

Easy-access savings usually pay low interest, and inflation can eat into it. That's the price of having the money there on a bad day. Money you won't need for years is a separate decision.

Loyal customers can lose out on savings too. So check your rate now and then, and keep the quick access you need.

So remember: reachable, protected, and apart. Before the next lesson, check that your savings account is covered by your country's deposit protection. Next, you'll decide what counts as an emergency.