Is SoFi wealth management a good place for my emergency fund?

Is a SoFi wealth management account a good place for my emergency fund? I'd like to have at least 3 months of my expenses tucked away for a rainy day but I'd also like to be able to get at it without penalties if/when needed. A traditional savings account provides great access to the funds, but I'd rather be making at least some interest on it.

Comments

  • Joseph WilliamsJoseph Williams Member, Sofi Wealth Expert

    Hi Julia,

    An emergency fund is essential. One never knows what life might toss at us. Having at least 3 months (preferably 6) of living expenses saved up is a great idea. As you mentioned, a traditional savings account allows you access to the cash when you might need it fast – which is important in an emergency. SoFi Wealth would not be an appropriate place for an emergency fund, as it is designed for long-term portfolio appreciation. While we use highly liquid ETFs in our portfolios, it can take several days to return the cash to your account if you do choose to liquidate. In addition, there is no guarantee with the market and your emergency savings could shrink in a downturn, just when you need the funds. The interest rates on savings accounts are not attractive, but there are three options you could look into for slightly better rates. 1) A savings account with an online bank. The lower cost structures of these banks compared with traditional brick-and-mortar institutions allows them to offer slightly higher interest rates to their customers. Note of caution: make sure they are FDIC Insured. 2) A no-penalty CD. CDs are time-specific savings vehicles which usually charge a penalty for early withdrawal. If you shop around, though, you may find one that allows you to draw down cash before the end of the period. 3) a money market checking account. You may pay a little more in fees, and some require a minimum and aren't FDIC-insured, however the convenience of check-writing capabilities and the slightly higher interest rates offered compared to savings account make a money market account a viable option for an emergency fund.

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