In the previous module you built your emergency fund — but where should you keep it? If it is sitting in a standard current account earning nothing, it is like losing money little by little: inflation erodes it gradually. The ideal option is to keep it in interest-bearing accounts or deposits, where the money remains instantly available and also earns a small interest that compensates for that effect.
The alternatives that do pay interest:
- Interest-bearing accounts: Bank accounts — usually at neobanks or online financial platforms — that pay you an annual percentage (typically 1–3%) simply for keeping your money there. Total liquidity: you can withdraw at any time.
- Fixed-term deposits: You give your money to the bank for a fixed period (6 or 12 months) in exchange for slightly higher interest. If you need the money before the term ends, the bank will penalise you.
Any money you might need within 1–2 years should not be in riskier investments. And if it is going to sit idle anyway, it could at least be in an account that pays interest — keeping it in a current account at 0% is the worst possible option.
You have $5,500 as an emergency fund. In your traditional bank, those $5,500 generate $0 per year. In an interest-bearing account at 2.5% per year, they would generate $138 — without doing anything and with the money available at any time.
There is a dedicated module on interest-bearing accounts and deposits further ahead, where you will go deeper into how they work and how to choose the best product.