Best places to keep your emergency fund in 2025

Whether it's a car that needs major repairs or an aging roof that's leaking water, unwelcome surprises have a way of popping up when least expected. An emergency fund is your financial safety net, giving you a source of cash you can tap when needed rather than taking on debt or sacrificing other financial goals.

If you're already setting aside a significant amount of cash for what-ifs, you're off to a good start. But you can optimize those savings when you purposefully decide  where to keep your emergency fund. You'll want to ensure the money is easily accessible, well protected and maybe even gaining value.

An emergency fund is money you keep separate from your day-to-day cash so you have a backup plan for unexpected expenses or a loss of income. When you're prepared with savings in reserve, you may be able to avoid having to make a hard choice or dramatic lifestyle changes when faced with a financial challenge.

Everyone experiences economic jolts from time to time. But you don't want to be in a situation where you have to decide between fixing a broken furnace at the peak of winter or having groceries for the month. If you lose your job without notice, you'll appreciate having a way to support yourself while you find another path forward.

By building up savings on the side when times are good, you'll have something to draw from rather than scrambling to find money when you need it.

The general guideline for an emergency fund is to have at least three to six months of your committed living expenses. This figure differs for everyone depending on your budget, lifestyle and circumstances. Whether you gradually save those dollars or have a lump sum, keeping it accessible for emergencies is key. Your target also can vary if you would be OK cutting back if needed or if you have financial obligations you can't skip out on.

These questions can help you decide how much to have in an emergency fund:

• How stable is your income? If you work in an industry that could be hit hard by an economic downturn, you might want a larger cash cushion (closer to six months or even a year).
• How big is your household? The more people who depend on your paycheck, the more you should have in your backup savings.
• How much debt do you have? When you carry substantial credit card or loan balances, a larger contingency fund can help you stay afloat during a crisis.
• Do you rent or own your home? If you're a homeowner, it's smart to have extra funds for potentially expensive unexpected repairs.

Consider a scenario where you're single and your essential spending is less than half of your take-home pay. In that case, setting aside three times your monthly living expenses could be enough for anything you may face. But if you're the primary earner with a partner and kids or a business owner with variable income, you may want to be able to withstand six months or more of no income if something were to happen.

You'll want to put your "just in case" money somewhere you can get to it quickly and easily. But you also don't want to let a large amount of money sit in an account gathering nothing but dust. Think about what combination of saving and investment features could let you stash your emergency fund safely while also creating a way to keep your money working hard for you.

As you consider where to keep your rainy-day money, think about the features that would make you feel confident you're saving wisely:

Liquidity is the ability to quickly turn your assets into cash without a fee. If you suddenly lost your job, how would you get the money to pay for groceries and utilities? Your emergency fund should be fairly accessible—a savings account or CD ladder is likely a better option than, say, a real estate investment you'd have to sell.

Principal protection means preserving the value of your initial savings, regardless of the economic situation. This could mean an FDIC-insured account or something with a guaranteed interest rate. To ensure all your money is there when you need it, avoid putting your emergency savings in investments that have a high short-term risk.

To get the most out of your money, seek out an account that lets it grow over time. It can be challenging because this is often a tradeoff for both liquidity and safety. Typically, the more growth potential, the less accessibility and less principal protection you have. For an emergency fund, consider accounts that offer compound interest, where what you put in faces little to no risk of loss but still has the possibility of keeping pace with inflation.

Where you decide to keep your emergency savings will determine how fast you can access it and how much it earns over time. These are some of the options that hit a sweet spot among liquidity, protection and potential, so that your money will be there if you need it.

When you're dealing with large sums like several months of your income, a high-yield savings account at an online bank may be a better option than a simple savings account. Many digital banks can offer a much larger annual percentage yield (APY) than brick-and-mortar institutions because they often have lower overhead costs. Keep in mind, too, that you aren't limited to making one choice. You can have multiple savings accounts that maximize account offerings at various institutions.

A money market account is also an interest-bearing account at banking institutions. The interest rates often are similar to online bank accounts, but there may be important differences. Money markets may not have check-writing ability, so it may mean slightly less liquidity. They also may have high minimum balances, and some may limit the frequency of withdrawals.

Money markets with tiered interest rates mean you'll get higher returns if you keep more money in the account. These interest rates can fluctuate based on the market, which can mean greater growth potential.

Certificates of deposit, or CDs, typically offer interest rates that are slightly higher than money market or high-yield savings accounts. CDs generally have strong principal protection, but you can lose money if you close the account before maturity due to fees and penalties. This pulls down the liquidity factor because your money is essentially tied up through the CD's term.

One way around this, however, is to set up a CD ladder. Staggering the terms and maturity dates of a set of CDs means you have rotating access points so that one of them is always close to being available without penalties.

Series I savings bonds from the U.S. Treasury have historically been a steady and safe investment. That doesn't mean you have to settle for humdrum returns, however. A portion of the interest paid on I bonds is linked to the consumer price index, which can help hedge against inflation.

Some caveats include being limited to buying $10,000 of electronic I bonds or $5,000 of paper bonds per calendar year. The liquidity also isn't very high. Your money is tied up for at least 12 months, and if you redeem a bond in less than five years, you forfeit the last three months of interest.

Keeping emergency dollars in stocks, mutual funds, retirement accounts or other accounts that require days to settle the trade or may cost a fee to access should not be where you keep your emergency funds. Because a financial crunch can happen at any time, it may be tempting to keep your emergency money immediately on hand. But having large amounts of cash or sticking it in a checking account with little or no interest won't let your funds grow. In fact, you'll likely lose value when holding onto cash because inflation can mean your dollars don't go as far as they once did.

An emergency fund should also be separate from your retirement savings and other accounts dedicated to a specific financial goal, like saving to buy a home or pay for college. Tapping into those accounts for an emergency takes away money from your future.

Finally, avoid taking high risks with your emergency savings. Chasing big returns that don't pan out can mean losing more than you started with. Stocks, mutual funds or corporate bonds can be a good choice for long term needs, but they're not a reliable fit when you need money on short notice. Also steer clear of putting your money in real estate or other assets where liquidity depends entirely on competitive buying and selling.

Building an emergency fund should be a cornerstone of your financial foundation. These are some of the best ways to grow and manage your backup savings so you're ready for any situation that arises:

• Have clear objectives. Determine the amount of accessible funds you need based on your circumstances and keep contributing until you reach that goal.
• Automate your savings. Set up recurring bank transfers to avoid spending money that should be part of your emergency fund. If your employer offers direct deposit, you may be able to divert a fixed amount from your paycheck right to your separate emergency account.
• Use this backup stash purposefully. Sudden medical bills and unexpected home damage are genuine emergencies. A vacation abroad typically isn't.

• Establish a separate account. Don't mix your emergency funds with money for routine, short-term needs. Keep it in a different account that you don't use unless it's absolutely necessary.
• Ladder accounts. Consider having one month in a savings account, the next few months in a money market or high-yield savings account and the last couple months in a CD or mutual fund.

What if I can't save three to six months of expenses?

Don't worry if you don't have your target amount in hand just yet. If you're behind, consistently making whatever contributions you can—even if it's only $50 or $100 a month—will have meaningful benefits over the long haul. Even a month or two of expenses in the bank is far better than none at all.

What if I need to use money from my emergency fund?

Your contingency money is meant for unexpected expenses or life changes. So don't feel guilty about tapping into it if you're staring down a large bill or you recently lost your job. Once you're back on your feet, prioritize rebuilding your fund until you reach your desired amount.

How do I replenish my emergency fund after drawing from it?

Once the emergency is out of sight, you can manually transfer money into your emergency fund. However, there's always the danger that you'll spend it first. It may be more effective to set up a direct deposit or bank transfer that diverts part of your paycheck into your back-up fund each month, without you even thinking about it.

Your emergency savings is money that's there for you when you need it most. But even with the best planning, you may have a financial setback that goes beyond what you've stored on the side.

It's helpful to talk through potential scenarios and come up with a big-picture strategy that navigates any threats to your particular goals. A Thrivent financial advisor can help you identify target savings amounts that make sense for your situation and go through options for its best for you to store your money. They'll also work with you to make backup plans for your backup plans so you can feel comfortably confident on your journey.