10 Best Banks for Emergency Funds of January 2025
Updated December 27, 2024 at 3:01 am
There’s no reason for your emergency cash to sit idle.
When building an emergency fund, we’re often told to focus more on liquidity and access than on yield. But there’s nothing wrong with checking out cash accounts with high yields. In fact, some accounts allow you to make a high yield while still providing liquidity and access.
Let’s take a look at some of the best banks for emergency funds, as well as review how to use your account effectively and what an emergency fund should not be used for.
Our Methodology Newsweek Vault’s banking experts have done hundreds of hours of research to present you with all the latest information about your banking options. Whether you’re interested in opening a new checking account or savings account, our research spans all the top online banks, credit unions and brick-and-mortar branches.
We assessed the following five key factors to help you choose the best account for your personal finance needs.
- Associated fees
- ATM access
- Balance requirements
- Customer service
- Interest-earning potential
Key Takeaways Vault’s Viewpoint on the Best Bank Accounts for Building Your Emergency Fund
- Build your emergency fund with a bank that offers a high-yield savings or money market account for better liquidity, accessibility, and interest earnings.
- Be aware that online banks will typically offer higher interest rates and lower fees for your initial deposit, making them an exceptional choice for growing your emergency fund faster.
- It is best to avoid keeping your emergency fund in checking accounts, CDs, or the stock market, as these financial instruments provide little to no interest and are too volatile for emergency use cases.
- The rule of thumb for the emergency fund is 3 to 6 months of living expenses—growing this figure to 9 or 12 months of living expenses will give you added financial security.
- Utilize automatic transfers from your checking account or direct deposits to continuously grow your rainy day fund without having to maintain the fund consistently.
Our Picks for the Best Banks To Build Your Emergency Fund
1. UFB Direct
Best ATM Access
2. Capital One
Best Branch Acess
3. Vio Bank
Best Money Market
4. SoFi
Best Welcome Bonus
5. Synchrony Bank
Best For Easy Access To Funds
6. Bread Financial
Best CD Ladder
7. BrioDirect
Best For High Yield
8. CIT Bank
Best For A Bigger Emergency Fund
9. Ally Bank
Best Roundups
10. Vanguard
Best For Investors
Compare Newsweek’s Best Banks for Emergency Funds
1. UFB Direct
Best ATM Access
Vault Verified
Why We Chose It
UFB Direct’s Portfolio Savings Account can be combined with the Freedom Checking account for an extra APY boost. Additionally, UFB Direct offers fee-free access to tens of thousands of ATMs throughout the country and provides a complimentary ATM card. There are no restrictions on account transfers, making this account ideal for emergency savings. Read our UFB Direct review.
Pros
- ATM access at 90,000+ locations across the country
- Connected checking account to boost APY
- Unlimited transfers
Cons
- Limited banking products
- No in-person branches
- No standalone checking account
2. Capital One
Best Branch Access
Vault Verified
Why We Chose It
Capital One is known for offering second-chance accounts, including credit cards for those with fair-to-poor credit. Additionally, you can bank in person if you live near one of the nearly 300 branches. The 360 Performance Savings comes with no fees and a competitive yield and makes it easy to automatically save to build your emergency fund. Read our Capital One review.
Pros
- Offers second-chance financial products
- No minimum balance to maintain an account
- Has physical branches along with Capital One Cafes
Cons
- Can’t make cash deposits using partner ATMs
- No ATM access for the Performance Savings account
- Higher APYs are available elsewhere
3. Vio Bank
Best Money Market
Vault Verified
Why We Chose It
Vio has one of the highest APYs available for a savings account. The Cornerstone Money Market account offers the flexibility of money market accounts with the high yield associated with high-yield savings accounts. There’s no minimum balance to maintain, although you need an initial deposit to open the account. Read our Vio Bank review.
Pros
- One of the highest yields
- No monthly fees
- Relatively low opening deposit of $100
Cons
- No in-person banking
- No ATM card or access to ATMs
- No checking account
4. SoFi
Best Welcome Bonus
Vault Verified
Why We Chose It
SoFi offers between $50 and $300 as a welcome bonus when you open an account. That’s extra money you can put into your emergency fund. Plus you can get a connected checking account with free overdraft protection. SoFi offers a variety of other banking products and services, as well as membership benefits that include perks like career counseling. Read our SoFi review.
Pros and Cons
- Welcome bonus
- Connected checking account with free overdraft coverage
- Receive access to direct deposits up to two days sooner
No standalone checking account
To get the highest welcome bonus, you must deposit $5,000
The highest APY only applies when you have $5,000 in aggregate accounts
5. Synchrony Bank
Best For Easy Access to Funds
Vault Verified
Why We Chose It
Synchrony offers easy access to your emergency fund through a mobile app, easy transfers and fee-free ATMs available in all 50 states. Synchrony also refunds up to $5 per statement cycle when other institutions charge an ATM fee. Finally, you can easily deposit funds into your account using a transfer or mobile check deposit. Read our Synchrony Bank review.
Pros and Cons
- No minimum balance or monthly fees
- Deposit checks into the account with the mobile app
- Fee-free ATM access with reimbursement for other fees
- No in-person banking services
- Not all ATMs (such as those at drugstores) are eligible for fee reimbursement
- Limited banking products
6. Bread Financial
Best CD Ladder
Vault Verified
Why We Chose It
Bread Financial has a competitive savings account yield and offers high-yield CDs. If you plan to build your emergency fund using a CD ladder, it’s possible to get high yields on one, two and three-year CDs. Renewal CDs for these terms of one, two and three years can automatically renew at maturity (at an even higher rate).
Consider using a combination of a Bread Savings account and a CD ladder to get more from your emergency fund, including locking in competitive rates. While there’s no minimum balance, the initial deposit requirement for Bread Savings is $100. Read our Bread Savings review.
Pros and Cons
- High-yield short-term CDs to complement the savings account
- No monthly fees
- Calculators to help you understand your savings
- No ATM access for savings
- Limited banking products and services
- No in-person banking option
7. BrioDirect
Best For High Yield
Vault Verified
Why We Chose It
BrioDirect offers a high-yield savings product with one of the best available yields. But you must open your account with $5,000, although no minimum monthly balance is needed to avoid the monthly maintenance fee. The minimum deposit to open a high-yield CD is $500, which could supplement the savings account.
Pros and Cons
- Among the highest yields for a savings account
- Access to high-yield CDs
- No monthly service fee
- High opening deposit
- No in-person banking
- No ATM access for savings
8. CIT Bank
Best For A Bigger Emergency Fund
Vault Verified
Why We Chose It
If you already have money saved, CIT offers a competitive rate on balances of at least $5,000. CIT offers mobile check deposit for building your emergency fund, and you can open an account with an initial deposit of $100. CIT Bank also offers no-penalty CDs, which can contribute to emergency fund accessibility. You can also get jumbo CDs at CIT Bank. Read our CIT Bank review.
Pros and Cons
- Daily compounding interest
- No account minimums or monthly fees
- No ATM fees and reimbursement of up to $30 per month
- The APY on accounts with balances under $5,000 is only 0.25%
- Limited banking products and services
- No cash deposit
9. Open Acco
Best Roundups
Vault Verified
Why We Chose It
Ally makes it easy to automatically build your emergency fund. The savings account allows roundups as a way to save a little more with each connected transaction. Plus you can link a checking account to Ally Savings and have your habits analyzed. Then Ally will automatically move “extra” money into your savings, helping you build your emergency fund faster. Ally also reimburses up to $10 per statement cycle in other ATM fees. Read our Ally Bank review.
Pros and Cons
- Access to automated ways to build your emergency fund
- No fees or account minimums
- Create buckets for different goals
- APYs can be higher elsewhere
- No physical branches
- No cash deposits
10. Vanguard
Best For Investors
Vault Verified
Why We Chose It
For investors, the Vanguard Cash Plus Account can offer a competitive place to keep an emergency fund. Once you have at least $3,000 in the account, it’s also possible to invest in available money market funds offered by Vanguard to complement this account. The account is flexible, and it’s possible to use it to pay bills and connect to PayPal and Venmo, making it easy to directly handle emergency expenses.
Pros and Cons
- The choice to invest in money market accounts
- No minimum balance or monthly fees
- Flexibility to use the cash management account to pay expenses directly
- Lower APY than some other accounts
- Must elect electronic delivery to avoid $25 annual fee
- Need at least $3,300 to invest in the money market funds
What Is an Emergency Fund?
An emergency fund is designed to help you cover unexpected expenses. Rather than relying heavily on credit cards when something unplanned comes up, like the need for a car repair or an appliance replacement, you can use money you’ve already set aside for the purpose.
Your emergency fund can also provide you with money to cover regular costs if you experience an unexpected loss of income due to losing your job, getting your hours cut at work or if illness prevents you from working. With the help of an emergency fund, you can better face unexpected financial challenges.
How Much Money Is Needed for an Emergency Fund?
How much you need for an emergency depends on your situation. Many experts recommend saving at least three to six months’ worth of expenses for an emergency fund. But you might feel more secure with nine to 12 months’ worth of expenses. Some factors to consider when deciding on a target amount for your emergency fund include:
- Other sources of income: If you have other sources of household income, such as money from a side hustle, revenue from a rental or a partner with a stable job, you might feel comfortable with a smaller emergency fund.
- Amount of fixed expenses: Review your monthly, quarterly and annual expenses. Add up what you expect to pay for housing, transportation, insurance and other recurring costs. The higher your regular expenses, the bigger your emergency fund will likely be.
- Items you can cut from your budget: Decide which items can be removed from your budget in case of an emergency. If you can get rid of subscriptions, reduce entertainment spending or eliminate non-essential spending quickly if an emergency arises, you might be able to get by with a smaller emergency fund.
What Is an Emergency Fund Not Used For?
An emergency fund should not be used for regular, planned expenses. You also should avoid using emergency funds for non-essential items or costs that you’ve been saving up for, such as a major purchase. An emergency fund is specifically to cover unexpected but needed costs or regular expenses due to an unplanned change in circumstances.
If you want to save up for an unplanned purchase, consider using a separate high-yield account for that purpose. Divide your accounts according to your goals to maintain an available emergency fund when needed.
Consider your other options carefully before using your emergency fund to pay down debt. You might be able to get rid of a credit card balance with the money accumulated in your emergency fund, but what happens if your car breaks down in two weeks? If you depleted your emergency savings, you could end up right back in debt by putting the cost of the repair on your credit card.
How to Build an Emergency Fund
Building an emergency fund requires patience and persistence. You don’t need to have it fully funded right now. Instead, start small and build toward your target:
- Review your finances and budget and determine a target amount to save in your emergency fund.
- Figure out how much you can set aside regularly to build toward your goal. For example, if you can set aside $25 per week, start with that.
- Open a high-yield savings account that offers good rates, accessibility and liquidity.
- Set up an automatic transfer to move your initial amount regularly.
- If you have extra money, consider putting it in your emergency fund to reach your goal sooner.
- Evaluate your finances every two or three months to see if you can increase your automatic transfer into your emergency fund.
- Once you reach your emergency fund goal, consider making regular contributions toward another goal.
How to Choose a Bank for Your Emergency Fund
When choosing a bank for your emergency fund, consider comparing three to five institutions to determine which will work best for you and help you reach your goal faster.
Safety Is Key
Ensure your chosen institution has FDIC insurance (for banks) or NCUA insurance (for credit unions). If you’re putting your emergency fund into a fintech app, check to see what banks they partner with to keep your money and double-check that they are insured. That way, if the bank fails, your money is still yours.
Accessibility for Your Emergency Fund Is a Must
Review how often and how you can access funds. Some online savings accounts only allow transfers, while others come with ATM cards. Also, check for transaction limits. You might only be able to make up to six monthly transfers with some accounts but unlimited transfers with others. Finally, if you use a fintech app, be aware that these aren’t banks, and some situations can lead to frozen funds right when you need them.
A Better APY Can Help You Grow Your Fund Faster
Look for an annual percentage yield (APY) that is well above the national average. It’s true that when rates drop, your APY is likely to head lower as well. But your emergency fund is designed for safety and accessibility. The highest possible yield is a nice bonus but not the most important function of an emergency fund. Compare rates and make sure that you’re getting a competitive rate with safety and the level of accessibility you need.
Other Perks To Look Out For
All things being equal, don’t forget to consider other perks. Depending on your needs and financial style, you might like the idea of a welcome bonus, round-ups or automatic sweeps. Some savings accounts come with connected checking accounts that offer rewards or other perks that might make sense for you.
Emergency Fund Alternatives
Creating a personal safety net for the unexpected can include alternatives. These alternatives can be integrated into your overall plan for dealing with emergencies, allowing you to tweak how much you keep in your savings account.
Emergency Fund vs. Rainy Day Fund
A rainy day fund is designed for smaller expenses that might crop up and put a crimp in your budget plans. Often, these expenses are somewhat expected, such as home maintenance costs or vet bills for your furry family member. You know they’ll crop up at some point, but you’re not sure when.
You can cover these relatively small costs with a rainy day fund without dipping into your larger emergency fund. Your emergency fund can then be used for bigger situations, such as loss of income or a major surgery.
Emergency Fund vs. Health Savings Account or Flexible Savings Account
These accounts are tax-advantaged and designed to help with medical costs. If you end up needing a procedure or to buy a piece of expensive medical equipment, a health savings account or flexible savings account can help. Building these accounts can provide you with funds to cover healthcare costs without dipping into your emergency fund.
But be aware of the differences. You generally need to have a certain type of health insurance plan to qualify for a health savings account. Additionally, a Flexible Savings Account has limitations, such as being unable to roll over unused funds year-to-year.
Emergency Fund vs. Retirement Account
Generally, you shouldn’t assume your retirement account is the same thing as an emergency fund. But in a pinch, you might be able to use the money to cover the costs of unexpected emergencies:
- Some 401(k) plans allow for loans. These are tax- and penalty-free as long as you pay yourself back according to the loan rules.
- With a Roth IRA, you can withdraw your contributions (not your earnings) at any time without tax or penalty. But if you want to replace your withdrawal, there are time limits.
- Hardship exemptions allow you to withdraw money penalty-free (although you might still be responsible for taxes).
Carefully consider before taking this step, as you can’t replace time in the market and rebuilding your future nest egg can be difficult.
Frequently Asked Questions
What Is the Best Type of Account for Your Emergency Fund?
Many experts recommend keeping your emergency fund in a liquid and safe high-yield savings account. But depending on your risk tolerance, you might be able to use a two-tiered approach or keep your money in another type of account, such as an investment account.
Is It Possible to Save Too Much in an Emergency Fund?
Yes, because you’re likely getting a relatively low yield, keeping large amounts of money in a savings account might not be the most efficient use of your money. Once you reach your emergency fund target, consider putting money toward other goals, like increasing your retirement investing, growing a taxable investment account or saving for a major purchase.
Do I Need an Emergency Fund?
Yes, most people need an emergency fund. This will help you handle unplanned expenses or an unexpected loss of income. Having an emergency fund can reduce your need to go into debt when you experience a financial shock.
Is a $5,000 Emergency Fund Enough?
A $5,000 emergency fund might be enough if you are single, carry little debt, and have few healthcare expenses. However, a better rule of thumb is to try and bolster your emergency fund to 3-6 months of living expenses to stay as financially secure as possible.
Editorial Disclosure: We may receive a commission from affiliate partner links included on our site. However, this does not impact our staffs’ opinions or assessments.
