Had a talk with a retired banker in Cleveland who made me rethink my whole approach to emergency funds

I was at a coffee shop last Tuesday waiting on my order and this older gentleman noticed my Babble Finances newsletter peeking out of my bag. He sat down and told me he kept 15 months of expenses in a plain savings account his whole career, never touched a high yield or CD. He said he slept better knowing it was right there easy to grab, even though the interest was nothing. I've been chasing the best rates for years and wondering if I'm missing the point.

3 comments

3 Comments

clark.alex1mo ago

Old school wisdom like that is hard to argue with, peace of mind has a real value that shows up in rates at all. Never underestimate what keeping it simple does for your sleep.

alicehernandez1mo ago

Oh MAN, I gotta push back a little on something there @clark.alex. I agree with the spirit of what you're saying, peace of mind is huge and being simple helps a ton. But that line about "rates at all" - it's actually not quite right in practice. Insurance rates are set by actuaries crunching big data, not by how peaceful your life feels. Your premium goes down if you bundle policies or have a clean driving record, not from sleeping better. I've seen friends with the most complicated, chaotic lives get great rates just because they shopped around. So keep the peace of mind, that's real, but don't count on it to move your insurance numbers. Just wanted to clear that up before someone gets the wrong idea and expects their serenity to show up on a bill.

josephmartin1mo ago

Actuaries actually give a discount for homeowners who go five years without a claim too.