Put idle savings to use while keeping them liquid
First of all, look for a savings account with a decent interest rate. Online banks are good at offering those, and you can transfer your money back and forth from the checking account with a couple of business days' delay. ING Direct offers 1.1% APY right now - lame, but much better than nearly-nothing. If you'd like a little nicer rate of return you should also consider putting some of the money (the part you need least) in a short- or intermediate-term bond ETF or mutual fund. You can sell them quite readily, they pay more interest than a savings account, and because of the shorter maturities involved the interest rate risk is limited. (That's the one that makes your bonds less valuable now because the rates went up after you bought them.) I have some NYSE:BIV that's yielding 3.8% or so. I suppose it depends on how liquid you need, and if you're willing to put forth any risk whatsoever.  The stock market can be dangerous, but there are strategies out there that will allow you to insure yourself against significant loss, while likely earning you a decent return.  You can buy and sell options along with stocks so that if the stock drops, your loss is limited, and if it goes up or even stays where it's at, you make money (a lot more than 1% annually). Of course there's risk of loss, but if you plan ahead, you can cap that risk wherever you want, maybe 5%, maybe 10%, whatever suits your needs.  And as far as liquidity goes, it should be no more than a week or so to close your positions and get your money if you really need it. But even so, I would only recommend this after putting aside at least a few thousand in a cash account for emergencies. Since you're coming out of college, you're probably a new investor and don't know too much about stocks, etc. I was in the same situation as well.  I wanted to keep my cash 'liquid' and wanted to make low risk investments. What I ended up doing was investing the majority of my money in higher interest GICs (Guaranteed Investment Certificate) and keeping the rest in my chequing/savings account. I understand that GICs aren't exactly the most liquid asset out there. However, instead of investing it all into 1 GIC, I put them in to smaller increments with varying lock-in times and roll-over options. I.e. for 15000 keep $3000 on hand in your account 2x$1000 invested for 2 years 4x$1000 invested for 1 year 3x$1000 invested for 180 days 3x$1000 invested for 90 days When you find that you run out of cash from your $3000, you'll have a GIC expiring soon.  The 'problem' with GICs is that redeeming them before the maturity period usually incurs a penalty in the form of no interest.  Keeping them in smaller increments allows you to redeem only the amount you need without losing too much interest.  At maturity, if you don't need the money, you can just have the GIC renew.   The other problem with GICs, is that interest rates, though better than savings accounts, aren't that much more.  You're basically just fighting off inflation.  The benefit is that on maturity, you are guaranteed your principal and the interest.   This plan is easy to implement if your bank/credit union allows you to create and manage GICs online. I would suggest a high interest checking account if you qualify, or if you don't, an Investor's Deposit Account (IDA). "Provide you are willing to do a bit of work each month, you should apply for a ""rewards checking"" account.  Basically these accounts require you to set up direct deposit (can be any amount and your employer can easily deposit $25 into one account and the rest into another if you like).  They also require you to use your debit card attached to the account (probably about 10 times per month). Check out the list on the fatwallet finance forum.  Right now the best accounts are earning over 4%." I'd have a look at Capital One's Online account too, they've got 1.35% interest rate with 10% bonus if you have over $15k deposited. It is still low like all interest rates, but at least it is on top (or at least close)! I'm new to this, but how about putting a big part of your money into an MMA? I don't know about your country, but in Germany, some online banks easily offer as much as 2.1% pa, and you can access the money daily. If you want decent profit without risk this is a great deal, much better than most saving accounts. This may sound a little crazy but I would take $5K of that money and buy whiskey with it (Jack Daniel's would be my preference). My guess is that in 5 years that whiskey will be worth more than the $10K you put in the bank.  I just can't see how the dollar survives the next 5 years without a major downward adjustment. If I'm wrong then you have a nice party and give whiskey for Christmas gifts. If I'm right at least you will have some savings instead of $15K of useless dollars. Here is my justification for converting your US dollars into tangible assets.  Do you really think the money printing will ever stop?
No. That's the point of a passive strategy: you maintain a more or less constant mix of assets and don't try to figure out what's going to move where. Most funds keep a certain amount in cash at all times to satisfy outflows.  Net inflows will simply be added to the cash balance while net outflows subtract.  When the cash gets too low for the manager's comfort level (depends on the typical pattern of net inflows and outflows, as well as anticipated flows based on recent performance), the manager will sell some of his least favorite holdings, and when the cash gets too high he will buy some new holdings or add to his favorite existing holdings.  A passive fund works similarly, except the buys/sells are structured to minimize tracking error. There is no slack of money.  People who are saving their money don't have it stored under their mattress.  Instead they have it saved in a bank that is in turn being loaned out at the lowest rates in history.  All of this manipulation of the economy has finally caught up to us and the last thing we need is more manipulation.  We just have to let the bad investments and the misallocations weed out first.  I agree with you that it's a tough thing to endure in the short term but it will help us in the long term. i think emergency fund should be in a more liquid account (like regular saving or money market) so you can withdraw money any time, while your regular saving can be tied up in a long term CD, bond or an investment account. "Here's what I suggest... A few years ago, I got a chunk of change.  Not from an inheritance, but stock options in a company that was taken private.  We'd already been investing by that point.  But what I did: 1.  I took my time. 2.  I set aside a chunk of it (maybe a quarter) for taxes.  you shouldn't have this problem. 3.  I set aside a chunk for home renovations. 4.  I set aside a chunk for kids college fund 5.  I set aside a chunk for paying off the house 6.  I set aside a chunk to spend later 7.  I invested a chunk.  A small chunk directly in single stocks, a small chunk in muni bonds, but most just in Mutual Funds. I'm still spending that ""spend later"" chunk.  It's about 10 years later, and this summer it's home maintenance and a new car...  all, I figure it, coming out of some of that money I'd set aside for ""future spending.""" "Pay off the credit cards.  From now on, pay off the credit cards monthly.  Under no circumstances should you borrow money.  You have net worth but no external income.  Borrowing is useless to you.   $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee.  Keep $50,000 in checking and another $50k in savings.  The remainder put into CDs.  Don't expect interest income beyond inflation.  Real interest rates (after inflation) are often slightly negative.   People ask why you might keep money in the bank rather than stocks/bonds.  The problem is that stocks/bonds don't always maintain their value, much less go up.  The bank money won't gain, but it won't suddenly lose half its value either.  It can easily take five years after a stock market crash for the market to recover.  You don't want to be withdrawing from losses.   Some people have suggested more bonds and fewer stocks.  But putting some of the money in the bank is better than bonds.  Bonds sometimes lose money, like stocks.  Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture.  That way you're never desperate for money, and you can survive market dips.  And the stock/bond part of the investment will return more at 70/30 than 60/40.   $700,000 in stock mutual funds.  $300,000 in bond mutual funds.  Look for broad indexes rather than high returns.  You need this to grow by the inflation rate just to keep even.  That's $20,000 to $30,000 a year.  Keep the balance between 70/30 and 75/25.  You can move half the excess beyond inflation to your bank accounts.  That's the money you have to spend each year.  Don't withdraw money if you aren't keeping up with inflation.   Don't try to time the market.  Much better informed people with better resources will be trying to do that and failing.  Play the odds instead.  Keep to a consistent strategy and let the market come back to you.  If you chase it, you are likely to lose money.   If you don't spend money this year, you can save it for next year.  Anything beyond $200,000 in the bank accounts is available for spending.  In an emergency you may have to draw down the $200,000.  Be careful.  It's not as big a cushion as it seems, because you don't have an external income to replace it.   I live in southern California but would like to move overseas after establishing stable investments.   I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?).   These are contradictory goals, as stated.  A franchise (meaning a local business of a national brand) is not a ""stable investment"".  A franchise is something that you actively manage.  At minimum, you have to hire someone to run the franchise.  And as a general rule, they aren't as turnkey as they promise.   How do you pick a good manager?  How will you tell if they know how the business works?  Particularly if you don't know.  How will you tell that they are honest and won't just embezzle your money?  Or more honestly, give you too much of the business revenues such that the business is not sustainable?  Or spend so much on the business that you can't recover it as revenue?   Some have suggested that you meant brand or stock rather than franchise.  If so, you can ignore the last few paragraphs.  I would be careful about making moral judgments about companies.  McDonald's pays its workers too little.  Google invades privacy.  Exxon is bad for the environment.  Chase collects fees from people desperate for money.  Tesla relies on government subsidies.  Every successful company has some way in which it can be considered ""evil"".  And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch.   Regardless, you should invest in broad index funds rather than individual stocks.  If college is out of the question, then so should be stock investing.  It's at least as much work and needs to be maintained.   In terms of living overseas, dip your toe in first.  Rent a small place for a few months.  Find out how much it costs to live there.  Remember to leave money for bigger expenses.  You should be able to live on $20,000 or $25,000 a year now.  Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month).  Make sure that you have health insurance arranged.   Eventually you may buy a place.  If you can find one that you can afford for something like $100,000.  Note that $100,000 would be low in California but sufficient even in many places in the US.  Think rural, like the South or Midwest.  And of course that would be more money in many countries in South America, Africa, or southern Asia.  Even southern and eastern Europe might be possible.  You might even pay a bit more and rent part of the property.  In the US, this would be a duplex or a bed and breakfast.  They may use different terms elsewhere.   Given your health, do you need a maid/cook?  That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests.  Same with cooking, although that might be a second person (or more).  Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases.  Keep the business small enough that you can actively monitor it.   Part of the problem here is that a million dollars sounds like a lot of money but isn't.  You aren't rich.  This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries.  You can't live like a tourist.   It's true that many places overseas are cheaper.  But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.).  And the ones that aren't may surprise you.  And you also may find that some of the things that you personally want or need to buy are expensive elsewhere.  Dabble first and commit slowly; be sure first.  Include rarer things like travel in your expenses.   Long term, there will be currency rate worries overseas.  If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back).  And move your investments as well.  Your return may actually improve, although some of that is likely to be eaten up by inflation.  A 10% return in a country with 12% inflation is a negative real return.   Try to balance your investments by where your money gets spent.  If you are eating imported food, put some of the investment in the place from which you are importing.  That way, if exchange rates push your food costs up, they will likely increase your investments at the same time.  If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason.  Make currency fluctuations work with you rather than against you.   I don't know what your circumstances are in terms of health.  If you can work, you probably should.  Given twenty years, your million could grow to enough to live off securely.  As is, you would be in trouble with another stock market crash.  You'd have to live off the bank account money while you waited for your stocks and bonds to recover." Imagine that a fund had a large exit load that declined over several years. If you wanted to sell some or all of your investment in that fund you would face a large fee, unless you held it a long time. You would be hesitant to sell because waiting longer would save you money. That is the exact opposite of a liquid investment.  Therefore the ideal level for a liquid fund is to have zero exit load. You would simply plan for misc. expenses in your budget, and allocate a small amount to this every time you do your budget, eventually building up a pool of money that you can then use whenever you have to make a purchase such as that. "What you're describing makes sense. I'd probably call the non-liquid portion something besides my ""emergency fund"", but that's semantics mostly. If you have 3 months of ""very liquid"" cash in this emergency fund and you're comfortable that this amount is good for your situation, then I don't see why you can't have additional savings in more or less liquid vehicles. Whatever you set up, you'll want to think about how to tap it when you need it. You might have a CD ladder with one maturing every three months. That would give you access to these funds after your liquid funds dry up. (Or for a small/short term emergency, you'll be able to replenish the liquid fund with the next-maturing CD.) Or set up a T Bill ladder with the same structure. This might provide you with a tax advantage." The rule that I know is six months of income, stored in readily accessible savings (e.g. a savings or money market account).   Others have argued that it should be six months of expenses, which is of course easier to achieve.  I would recommend against that, partially because it is easier to achieve.  The other issue is that people are more prone to underestimate their expenses than their income.  Finally, if you base it on your current expenses, then budget for savings and have money left over, you often increase your expenses.  Sometimes obviously (e.g. a new car) and sometimes not (e.g. more restaurants or clubs).  Income increases are rarer and easier to see.   Either way, you can make that six months shorter or longer.  Six months is both feasible and capable of handling difficult emergencies.  Six years wouldn't be feasible.  One month wouldn't get you through a major emergency.   Examples of emergencies:   Your savings can be in any of multiple forms.  For example, someone was talking about buying real estate and renting it.  That's a form of savings, but it can be difficult to do withdrawals.  Stocks and bonds are better, but what if your emergency happens when the market is down?  Part of how emergency funds operate is that they are readily accessible.   Another issue is that a main goal of savings is to cover retirement.  So people put them in tax privileged retirement accounts.  The downside of that is that the money is not then available for emergencies without paying penalties.  You get benefits from retirement accounts but that's in exchange for limitations.   It's much easier to spend money than to save it.  There are many options and the world makes it easy to do.  Emergency funds make people really think about that portion of savings.  And thinking about saving before spending helps avoid situations where you shortchange savings.   Let's pretend that retirement accounts don't exist (perhaps they don't in your country).  Your savings is some mix of stocks and bonds.  You have a mortgaged house.  You've budgeted enough into stocks and bonds to cover retirement.  Now you have a major emergency.   As I understand your proposal, you would then take that money out of the stocks and bonds for retirement.  But then you no longer have enough for retirement.  Going forward, you will have to scrimp to get back on track.   An emergency fund says that you should do that scrimping early.  Because if you're used to spending any level of money, cutting that is painful.  But if you've only ever spent a certain level, not increasing it is much easier.  The longer you delay optional expenses, the less important they seem.   Scrimping beforehand also helps avoid the situation where the emergency happens at the end of your career.  It's one thing to scrimp for fifteen years at fifty.  What's your plan if you would have an emergency at sixty-five?  Or later?  Then you're reducing your living standard at retirement.   Now, maybe you save more than necessary.  It's not unknown.  But it's not typical either.  It is far more common to encounter someone who isn't saving enough than too much. "You are not wrong - just about anything can be charged and paid off in 30 days with a sale of non-liquid investments.  So there are not any emergencies I can think of that require completely liquid funds (cash). For me, the risks are more behavioral than financial: I'm not saying it's a ridiculous, stupid idea, and these are all ""what-if""s that can be countered with discipline and wise decisions, but having an emergency fund in cash certainly makes all of this simpler and reduces risk. If you have investments that you would have no hesitation liquidating to cover an emergency, then you can make it work.  For most people, the choice is either paying cash, or charging it without having investment funds to pay it off, and they're back in the cycle of paying minimum payments for months and drowning in debt." I agree. I have physical cash hidden in my house, a trick I learned from an elderly neighbor whose husband demanded they do it and it paid off for them twice. I have that and then will rely on credit if needed. My only question is if the statistic they mention is ALL savings or just what is in liquid assets. The standard advice is to have 3-6 months worth of expenses saved up in a highly liquid savings or money market account.   After you have that saved you could look to start investing.  I would recommend reading the bogleheads investment wiki (https://www.bogleheads.org/wiki/Getting_started).  Even if you aren't planning on following the bogle head's way of passive investing it will give you a lot of good info on options available to you to start investing. "There are a few major risks to doing something like that. First, you should never invest money you can't afford to lose. An emergency fund is money you can't afford to lose - by definition, you may need to have quick access to that money. If you determine that you need, for example, $3000 in emergency savings, that means that you need to have at least $3000 at all times - if you lose $500, then you now only have $2500 in emergency savings. Imagine what could've happened if you had invested your emergency savings during the 2008 crash, for example; you could easily have been in a position where you lost both your job and a good portion of your emergency savings at the same time, which is a terrible position to be in. If the car breaks down, you can't really say ""now's a bad time, wait until the stock market bounces back."" Second, with brokerage accounts, there may be a delay before you can actually access the money or transfer it to an account that you can actually withdraw cash from or write checks against (but some of this depends on the exact arrangement you have with your bank). This can be a problem if you're in a situation where you need immediate access to the money - if your furnace breaks in the middle of winter, you probably don't want to wait a few days for the sale and transfer to go through before you can have it fixed. Third, you can be forced to sell the investments at an unfavorable price because you're not sure when you're going to need it. You'd also likely incur trading fees and/or early withdrawal penalties when you tried to withdraw the money. Think about it this way: if you buy a bond that matures in 5 years, you're effectively betting that you won't have an emergency for the next 5 years. If you do, you'll have to either sell the bond or, if you're allowed to get the money back early, you'll likely forfeit a good amount of the interest you earned in the process (which kind of kills the point of buying the bond in the first place). Edit: As @Barmar pointed out in the comments, you may also have to pay taxes on the profits if you sell at a favorable price. In the U.S. at least, capital gains on stuff held for less than a year is taxed at your ordinary income tax rate and stuff held longer than a year is taxed at the long-term capital gains tax rate. So, if you hold the investment for less than a year, you're opening yourself up to the risks of short-term stock fluctuations as well as potential tax penalties, so if you put your emergency fund in stocks you're essentially betting that you won't have an emergency that year (which by definition you can't know). The purpose of an emergency fund is just that - to be an emergency fund. Its purpose isn't really to make money." "There are no risk-free high-liquidity instruments that pay a significant amount of interest.  There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits.   Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month.  You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to ""maximize"" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk.  Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them."