Emergency Cash Fund — Laying the Groundwork

In preparation for receiving my company performance bonus, and in preparation for beginning an emergency cash fund, I have opened high-interest online checking and savings accounts through ING Direct (now Capital One). Although the interest rates through ING Direct are not as great as they once were, the rates are still higher than those offered by Bank of America (NYSE: BAC).

Although I have been less then pleased with the overdraft fees charged by Bank of America, and with Bank of America's propensity for placing security holds on my debit card for routine purchases, I do not believe that I can abandon brick and mortar banking altogether. But as a holding place for my emergency cash fund, ING Direct will serve me well since I plan to let the cash holdings sit and accumulate interest while I pursue investing via my 401(k) and my Roth IRA.

While I would rather put the remaining balance of my performance bonus into my Roth IRA (which is far sexier than an emergency fund), an emergency cash fund brings a sense of peace of mind and day-to-day financial stability that cannot be matched even by investment holdings. If you do not yet have an emergency fund, don't be stupid any longer. Set aside enough cash to get you through a job loss or a family emergency. Just be sure to withdraw money from your emergency cash fund as a last resort, and replenish it right away if you do.