Should an emergency fund be kept in cash or a Short Term Money Market Fund

GazzaBloom

I agree with @Linton and @dunstonh - the purpose of an emergency fund is to be instantly available when needed, in an emergency you want to be looking at it not looking for it. Divesting from a STMMF could take a few days or longer by the time the cash is in your bank. For me, any interest earned is a secondary consideration for an emergency fund.

Stolas

Many regular savers give you easy access to your money - so there’s nothing stopping you taking advantage of their higher interest rates, while still having fast access to your cash if needed. 

Just so long as you don’t mind the bit of extra admin of course. 

EthicsGradient

GazzaBloom said:

I agree with @Linton and @dunstonh - the purpose of an emergency fund is to be instantly available when needed, in an emergency you want to be looking at it not looking for it. Divesting from a STMMF could take a few days or longer by the time the cash is in your bank. For me, any interest earned is a secondary consideration for an emergency fund.

I think this has become a nomenclature problem. The OP is about "an emergency fund of 6 months expenses". I think very few people will be thinking "I may need to spend 6 months' worth all in within 3 days". So I think the "6 months" is the bit people should concentrate on, not "emergency" - plus, as pointed out, the OP is talking about a home for half of it. The "emergency" here seems like "suddenly made redundant" - or maybe "suddenly need major house repairs" - which you would expect to have a few days to be able to pay for.

Emmia

For some "emergencies" like your boiler going bang unexpectedly, a credit card with a suitable limit would give you instant access to funds - you just need to have enough available to clear the balance when it's due to avoid interest.

GeoffTF

Emmia said:

For some "emergencies" like your boiler going bang unexpectedly, a credit card with a suitable limit would give you instant access to funds - you just need to have enough available to clear the balance when it's due to avoid interest.

That is a good point. Nonetheless, if you have your emergency fund in a money market fund and it gets gated, it could be months before you get the money, and you may not get all of it. That is not at all likely, but it could happen. Savings accounts can become blocked too, as can current accounts. I try to make sure that I do not have any single point of failure. Having a credit card with a bank that I do not use for other purposes, is part of my resilience plan. I have a Barclaycard Reward Card and the Skipton also uses Barclays, so I am careful about that.