Should you invest your emergency fund

Emergency fund is an account set aside to fund immediate financial needs, such as medical bills, job loss, or major home repair, among others. Having this kind of fund allows you to have financial security since you have a safety net for your emergency expenses.

Many financial experts recommend to have at least three to six months of your income. It is also advisable to have a separate account for this to avoid spending it. Plus, it can be easily access to in case emergency happens.

However, saving alone will not make your money grow. Plus, because of inflation, what you save today may not have the same value three to five years from now. This is why many people are considering to invest their emergency fund.

The advantage

·         Better potential returns for your money
·         Achieve your financial goal faster

The disadvantage

·         Potential loss
·         Liquidity

Where to keep your emergency fund?

There are different options when it comes to where to keep your emergency fund. You can choose whether it is in a bank account or in an investment. If you opt for an investment, it is important to learn the investment first since not all investment vehicles are created equal. You should determine the pros and cons of each investment option.

Here’s the different options that you can have on where you can save your emergency fund.

Checking account

Checking account is one of the basic options you can have. You can choose to have one with your current bank or you can find another. Make sure to look at the possible interest rates of checking account you are considering.

Verdict: Low risk and low potential return

High-yield savings account

One of the safest options to put your emergency fund is the high-yield savings account. Opting for this will enable you to easily access your fund when emergency arises. Plus, the money you put here can potentially grow since it pays high interest rates. When opting for this, consider these factors:
·         Initial deposit required
·         Interest rate
·         Minimum balance required
·         Associated fees

Verdict: Medium risk, medium potential return.


UITF is stands for Unit Investment Trust Fund. This type of investment enable you to invest your money in a fund that managed by fund managers. You will earn when the net asset value or NAVPU goes up.

However, investing your emergency fund in UITF might be risky since there is an equity fund in UITF. So, it is important to weigh the pros and cons of choosing UITF as investment for your emergency fund.

There are less risky options like balanced and bond funds. Just ensure that you study these investment vehicles before putting your money on it. You can read more about investment options here:

Verdict: High potential return, high risk

Key takeaway
Investing your emergency fund might be a good idea to allow you to earn a higher return. However, you must have a knowledge on your investment that you are getting into, since investing it might expose it to risk.