Should we park our money in our escrow account?
The likely outcome of adding extra money to your escrow account is that the bank will send you a check for excess funds at the end of the year (or whenever your property tax and insurance payments are processed). Could you just redeposit that money immediately? Possibly. I bet most banks wouldn't care and would just follow the routine of clearing the excess from the account next time they process payments. I've never received a 1099 for interest in an escrow account. It is possible that when you start earning enough interest that a 1099 is required by law ($10/year) that the bank gets a little more aggressive about pushing your money back to you. I'm not sure why that hassle is any better than just opening up your average internet savings account (many don't have any of the fees you mentioned) and parking it there with a similar interest rate. You can deposit and withdraw using ACH transactions that post by the next business day. That said, unless they do start rejecting your money, there aren't a lot of downsides in your plan. You should talk to a financial fiduciary (make sure they are a fiduciary, not all planners are) about investing your money.  Even ultra safe investments such as treasury bonds will beat the 1% interest rate offered by your savings account (the yield on the 5 year treasury is currently around 2%).
@ Chris:  Companies like Keane, ours, and others know where to look for these funds and where to ask at the correct agencies that are holding this money that is not part of the public links that you have access to. This is how we find this information.  Our types of companies spend significant time, money and resources in finding out about the money, then finding who it actually belongs to (because it does not always belong to who is mentioned on the list) and then finding the correct individual. @ jdsweet:  I apologize if you think this is a marketing ploy.  It is not.  Our company doesn't even take phone calls from people that want us to find them money.  Only if we contact someone, because at that time we're confident that the person we touch base with is due the funds. Again, I am not plugging our company, but trying to let Neil know that in some cases he is right, you don't need a third party to claim funds for you - if you can find them.  In this case, he has looked and cannot find them.  Keane is charging a fair amount to retrieve funds he cannot find and doesn't know about and is not charging him anything to do all the work. Again, as mentioned above, the direct answer is that we know how to access information and lists that have this money hidden from the public because the agency holding the funds doesn't want you to know about it so that they can escheat the funds.  Escheating is the state's legal way to confiscate your money.   See, if you don't put in a claim for the money (depending on what type it is and where it is located) the agency and state holding the funds has certain time frames for you to get the money.  If you don't, again, they get to keep it and that is what they want despite what they say.  That is why there is approximately $33 Billion that is known to the public and really $1 Trillion that's out there. I apologize if you think that this is a plug for my company, it's not because we're not looking for calls, we make them.  I'm also not asking Neil for his business. From all accounts on my side, this seems like a fair deal. One thing you may want to consider if your budget is tight....do your own Escrow.  You have to be disciplined, but I don't see that as a problem for you.  Nice job on no car payment or student loans! The banks almost always screw up escrow, and you can keep your monthly savings payment exactly what they need to be.  Dump 610 in a savings account every month and you should be golden.   Here in Orange County, Florida taxes are due in April, you can get a discount of 1%/month if you pay early.  November is the first time you can pay it.  When you run your own escrow, as I do, I can pay when I want (at the end of November) and maximize my discount.  Now your situation may differ, but probably 110% (not based upon research) of escrow accounts are goofed up. You said the hold would last a week. That's your answer. No you can't spend it again until the hold clears. With the requirement that the money is 100% available immediately and that you can not suffer a loss of principal, the suggestions you gave of an online savings account is a good one. Personally, I use ING. Something with an FDIC guarentee, so a bank. With an emergency fund, I think the 'return of capital' is more important than the 'return on the capital', so I'm fine with putting it in a standard savings account in a local bank(not an internet account) even if it pays next to nothing. The beauty is that since the bank is local, you can walk in and withdraw it all during any weekday. Very generally speaking if you have a loan, in which something is used as collateral, the leader will likely require you to insure that collateral.   In your case that would be a car.  Yes certainly a lender will require you to insure the vehicle that they finance (Toyota or otherwise).  Of course, if you purchase a vehicle for cash (which is advisable anyway), then the insurance option is somewhat yours. Some states may require that a certain amount of coverage is carried on a registered vehicle.  However, you may be able to drop the collision, rental car, and other options from your policy saving you some money. So you buy a new car for cash ($25K or so) and store the thing.  What happens if the car suffers damage during storage?  Are you willing to save a few dollars to have the loss of an asset?  You will have to insure the thing in some way and I bet if you buy the proper policy the amount save will be very minimal. Sure you could drop the road side assistance, rental car, and some other options, during your storage time but that probably will not amount to a lot of money. From my 2003 Colorado experience here:  Earnest money shows that your offer is legit and is held until escrow as you recall correctly.  I assumed you meant escrow money, because I cannot think of any other non-refundable deposit you'd put on a home.  Perhaps for a new home or a manufactured home? Economically it doesn't make much difference, but I like to control the account because I can adjust the amount I put aide each month based on the new tax rates that come out each spring. This allow me finer control. I also know that the bills have been paid, I had one lender years ago that failed to pay the property tax bill, I had to end the money in to the county, and then pend months fighting the lender to get the money back. Now I avoid escrow accounts.  The money being collected by the mortgage servicing company for property taxes and property insurance goes into a separate account. The company insists on handling the funds to make sure that these bills are paid on time, thus protecting their investment. The failure to pay the taxes leaves the property subject to forfeiture via tax lien.  The failure to pay property insurance leaves the house unprotected if there is a fire or other incident. You can avoid the use of an escrow  account if you have enough equity in the account. Some lenders ask for you to provide proof of payment each year if you are going to pay it yourself.  At the end of each year the servicing company will provide you with an accounting for interest on the loan, and the amount of money spent on taxes and insurance. Also expect that they will make adjustments to the monthly withholding based on estimated increases for taxes and insurance.  Depending on your financial situation the interest, taxes may be included on Schedule A. If you have a rental property the interest, taxes and insurance are considered expenses that you can write off. The biggest issue with escrow accounts is that the company can have a buffer built in to protect them from unexpected increases. Many people view the calculation of the buffer a confusing and feel that they are overpaying.  If you want to avoid the escrow account you should make sure that each month you put the money into a separate account so that when the property tax bill is due you can pay it on time. When savings accounts earned significant interest it was possible to make a little money in the deal, but that hasn't been true for the last few years. "Edited answer, given that I didn't address the emergency fund aspect originally: None. You've said you don't feel comfortable locking it away where you wouldn't be able to get to it in an emergency. If you don't like locking it away, the answer to ""How much money should I lock up in my savings account?"" is none. On a more personal note, the interest rates on bonds are just awful. Over five years, you can do better." Look at a mixture of low-fee index funds, low-fee bond funds, and CDs. The exact allocation has to be tailored to your appetite for risk. If you only want to park the money with essentially no risk of loss then you need FDIC insured products like CDs or a money market account (as opposed to a money market fund which is not FDIC insured). However as others have said, interest rates are awful now.  Since you are in your early 30's, and expect to keep this investment for 10+ years, you can probably tolerate a bit of risk. Also considering speaking to a tax professional to determine the specific tax benefits/drawbacks of one investment strategy (funds and CDs) versus another (e.g. real estate). "I live in Kenya, and also here we have corruption. However, we use EFT, RTGS, Mobile Money and its more safe than cheques. Beware, that paper based payments cost you way more than anything electronic. Often the bank charge you for the cheque book, they charge for receiving paper based payment instruments, and settlement is often a day or two, while mobile/electronic settlement is instant. Seen from a tenants perspective, its also easier. Imagine too, the small likelihood that you loose the cheques from your tenants?  Your fear for your account is understandable, but you may need to learn a little now, about how accounts are handled. In an online community only the persons with the necessary electronic credentials can withdraw from your account, being it online via your screen, or at the cashier, or by other means.  Therefore, your money are safer via the electronic means. The cause of your concern / unease can be that you are relinquishing your control from a paper-based, visible system, into a system which you may not know so much about, maybe because of that you have not done so much on computers, yet.  As a most recent caveat, though, don't get into the so called bitcoin technology, it is not safe, and as you saw, most recently, the very owner himself became the perpetrator breaking his very own bank by artificially inflating amounts on his own account, according to Japanese authorities. Now, electronic banking has been in existence since soon 40 years. Its based on cash, so behind the scenes, between the banks, huge deposits of cash are being moved physically, around from vault to vault, in the bank's money exchange / transaction settlement system. Thereby, a bank does not need to physically transfer money from one physical bank building to another - as they have huge loads of cash stashed in central depositories, between which they can now exchange money as compensation for cheques and electronic transfers. So, behind the scene of the electronic world, there are still physical cash being moved around, deep under the ground, in such vaults. I hope this has given you a little bit of confidence in the ""modern times"". If you have further questions, you are welcome.  These were my 50 cents :-). My background is in software development, where I have worked on banking systems for more than 10 years, making banking systems, as part of huge teams, working for the largest banks in the world." Here are some options: Park your money in a bank that works best for you. Banks have electronic money counters so the order really doesn't matter. When I make a cash deposit that's large, I usually just put it in an envelope and hand it over. My bank did fine the first couple years of handling my escrow, then out of the blue, totally messed it up and cost me a lot of time straightening it all out with them as well as straightening out with my taxing authority.  I told them to send me the balance of the escrow and cancel it, that I would handle it from then on and they did.  There was a qualification that I met, I just can't remember what that was. I too have a lot of equity and was never late on a payment.  I also manage it via direct deposit from my paychecks into interest bearing accounts. "In many states banks are required to pay interest on your escrow according to this article. I know i am getting interest paid. Once your mortgage is setup with an escrow there is no way to get rid of it (only to refinance). Also nowadays many banks require you to escrow taxes and insurance. It's their way to make sure you don't default on your taxes and don't cancel insurance on ""their"" property."