Table of Contents
Life is unpredictable, and an emergency fund acts as your financial safety net. Whether it’s covering unexpected medical expenses or getting through a sudden job loss, an emergency fund gives you peace of mind and prevents you from relying on high-interest credit cards or loans during a crisis.
Experts generally recommend saving at least three to six months’ worth of living expenses for emergencies, which can add up to a sizable sum. With this much money sitting in an account, it’s natural to wonder: Should you invest your emergency fund to help it grow faster?
The answer is generally, no. Emergency funds should be readily available and liquid — meaning you can access them quickly without losing value. Riskier investments like stocks, mutual funds, or real estate, typically do not fit that profile. However, there are safe places where you can store your emergency fund while still earning a modest return.
Key Points
• Emergency funds should not be invested in volatile assets to avoid potential losses.
• Market fluctuations and withdrawal restrictions can pose significant risks to emergency funds.
• Liquidity ensures quick access to funds during emergencies.
• High-yield savings, money market accounts, and certain CDs are often recommended for emergency funds.
Should You Invest Your Emergency Fund?
It can be tempting to put your emergency fund to work. After all, if you’ve saved $10,000 or more, why not grow it in the stock market or tuck it into your retirement account? On the surface, it feels like a smart financial move.
However, your emergency fund serves a very different purpose from your investment accounts. Investments are meant to build wealth over time, while an emergency fund exists to protect you in the short term. That means safety and accessibility may matter more than potential growth.
Think of it this way: If you put $10,000 into a savings account, you’ll have that $10,000 several months from now. If you put that $10,000 in a brokerage account and invest in stocks, it might grow to $12,000 in a few months, but it could just as easily drop to $8,000 (or possibly even less) right when you need it most.
On top of that, certain investment accounts come with restrictions, taxes, and/or penalties that make it harder — and more expensive — to access your money quickly.
This doesn’t mean your emergency fund has to sit in a checking account earning little to no interest. The key is to find a balance: a place where your money remains safe, liquid, and accessible, while earning at least some return.
Recommended: Emergency Fund Calculator
The Risks of Investing an Emergency Fund
While investing can build wealth in other areas of your financial plan, it can undermine the purpose of your emergency fund. Here are the biggest risks you face when putting those savings into investments.
It Might Take You Longer to Get Your Money
Emergencies, by definition, require quick action. If your car breaks down or a pipe in your home bursts, you’ll likely need funds immediately. Some investments, however, are not designed for instant access. Stocks and mutual funds, for example, must be sold before you can access cash, and it can take a couple of business days for the transaction to settle. The longer it takes to access your money, the less effective your emergency fund becomes.
You Could Risk Losing Money
The stock market can be volatile. If you need to access your emergency fund during a market downturn, you could be forced to sell your investments at a loss. Even relatively stable assets like bonds or certain mutual funds can lose value when interest rates rise or market conditions shift. This makes them unreliable for something as crucial as an emergency fund.
You could also face taxes and penalties. Withdrawals from taxable accounts may trigger capital gains taxes, and pulling money early from retirement accounts often comes with penalties. What’s supposed to be a cushion could quickly turn into a financial headache.
Considerations for Storing an Emergency Fund
Instead of chasing returns, you’re usually better off putting your emergency fund in an account that is safe, yet not stagnant. The best places to keep an emergency fund allow you to:
Access Your Funds Easily
The most important feature of an emergency fund is liquidity. You need to be able to access the money quickly, ideally within minutes or hours, not two to three business days, or more. This means avoiding accounts where you might face delay, fees, or penalties for withdrawals.
Earn Potentials Returns on Your Money
While safety comes first, that doesn’t mean your emergency fund has to sit idle. Traditional savings accounts often earn a relatively low interest rate, but newer options such as high-yield savings accounts and money market accounts generally offer much better returns without sacrificing accessibility.
Even if the interest rate seems small compared to investment returns, earning 3.00% to 4.50% APY (Annual Percentage Yield) on your emergency fund can help combat inflation and ensure your money grows slowly over time instead of losing purchasing power.
3 Options for Keeping an Emergency Fund
If you want your emergency fund to be both safe and productive, here are three common options worth considering.
High-Yield Savings Account
A high-yield savings account (HYSA) can be a good choice for an emergency fund. Many HYSAs are offered by online banks, which generally have lower overhead costs and can pass those savings on to customers through higher interest rates and fewer (or no) fees.
HYSAs generally pay interest rates far above traditional savings accounts — often several times the national average. In addition, funds are typically FDIC-insured and accessible anytime.
Money Market Account
A money market account (MMA) blends features of savings and checking accounts. They typically offer higher interest rates than standard savings accounts while providing some of the conveniences of a checking account, such as checks or a debit card. Just keep in mind that some MMAs require high minimum balances and may charge monthly fees if balance requirements aren’t met.
Certificates of Deposit
Certificates of Deposit (CDs) offer a guaranteed return without risking your money, and rates are typically higher than traditional savings accounts. The tradeoff is that your funds are locked up for a specific term (which can range from a few months to several years), and early withdrawals typically trigger a penalty. However, there are two ways to make CDs work for your emergency fund:
• CD ladders: With this strategy, you spread your emergency fund across multiple CDs with staggered maturity dates (e.g., 3 months, 6 months, 12 months). This way, a portion of your funds becomes available regularly while still earning higher interest.
• No-penalty CDs: Some banks offer CDs that allow you to withdraw funds early without penalties. These can be a good compromise between higher interest and accessibility. Just keep in mind that no-penalty CD rates tend to be lower than traditional CDs with similar term lengths.
While CDs generally shouldn’t hold your entire emergency fund, they can work for a portion of it if you want to maximize returns without significant risk.
The Takeaway
An emergency fund isn’t meant to be an investment but, rather, a safety net. Putting your emergency savings in volatile investments like stocks or real estate can leave you vulnerable just when you need money the most.
That said, you don’t have to leave your emergency fund in a traditional savings account that may earn lower rates. High-yield savings accounts, money market accounts, and certain CDs can offer the perfect balance of safety, accessibility, and growth.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Is it wise to invest your emergency fund?
Generally, it’s not wise to invest your emergency fund in risky assets like stocks, mutual funds, or real estate. The purpose of this fund is immediate accessibility and preservation of capital, not growth. Investments can fluctuate, and if you need cash during a downturn, you might be forced to sell at a loss. A safer option is keeping your fund in a high-yield savings account or money market account, where it earns more modest interest but remains secure and easily accessible.
How much of my emergency fund should be liquid?
Ideally, your entire emergency fund should be liquid, or at least the majority of it. Emergencies often require immediate cash access, so keeping funds in a savings account, checking account, or money market account is generally best.
If you have a larger emergency fund — say, more than six months’ living expenses — you might keep a small portion in short-term certificates of deposit (CDs). However, it’s generally a good idea to keep at least three to six months of essential expenses fully liquid and easily accessible without penalties.
What should an emergency fund not be used for?
An emergency fund should not be used for planned expenses, vacations, shopping, or investments. It exists specifically for unexpected, urgent financial needs such as medical bills, car repairs, or a sudden job loss. Using it for non-emergencies undermines its purpose and can leave you vulnerable when a real crisis comes up.
More from the emergency fund series:
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet
Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.
See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOBNK-Q325-112