Today is devoted to a holistic review of where your money is and how it’s working for (or against) you, including:

  1. The importance of having an emergency fund
  2. Using high-interest savings accounts to make your money work for you
  3. Using credit cards responsibly and to your advantage
  4. Accessing additional lines of credit
I’ve included some homestead greatest hits photos to accompany us today

Welcome to Day 4 of my pandemic-inspired, what-do-I-do-with-my-money Uber Frugal Week series. For more about the series, including an overview of what I’ll cover each day, check this out. I recommend you read the series in order; start with Day 1 here. Read disclaimers about me and the series here.

So far in the series, we’ve covered:

While the Uber Frugal Month is an email program, the Uber Frugal Week will appear right here on the blog in a series of posts. I’ll publish Uber Frugal Week posts as quickly as I can but, in all honesty, I haven’t written all of them yet because pandemic means both of my kids are home all the time and my husband and I are both working from home. I’m writing as fast as I can, I promise!

Advertiser Disclosure: Frugalwoods partners with CardRatings for coverage of credit card products. Frugalwoods and CardRatings may receive a commission from card issuers at no extra cost to you. This post contains affiliate links; here’s a boring (but important) explanation of how Frugalwoods makes money. 

Uber Frugal Week: Day 4

1) Emergency Funds: They Are Your Friends

One of my all-time faves

Emergency fund is a fancy term for “money you’ve saved just in case.” For many folks, right now is the just-in-case time. An emergency fund is money you set aside to cover you in the event of, oh, a global pandemic with record levels of unemployment, for example.

  • If you’ve lost your job and don’t have an emergency fund, don’t panic–there are relief and forbearance programs you can apply for: see Day 2 for a rundown.
  • If you still have a job, now’s the time to build–or enhance–your emergency fund.

An emergency fund is, first and foremost, cash money. Stuff like cars, houses, your grandmother’s china, and jewelry are NOT emergency funds. An emergency fund needs to be actual money so that you can actually spend it in the event of an actual emergency. Here’s why: If you’re standing at the mechanic’s receiving bad news about your carburetor*, you’re not going to be able to pay the bill with your paid-off house.

*I have no idea what that is, but I’m fairly certain it’s a car part that can go bad.

How Big Should An Emergency Fund Be?

This is a matter of personal preference and it depends on your risk tolerance. The generic, general advice is that an emergency fund should be three to six months worth of your living expenses (see Day 1 for how to track and categorize your living expenses). For example, if you spend $4,500 every month, you should target an emergency fund in the range of $13,500 (three months worth) to $27,000 (six month worth). The reason emergency funds are calibrated on living expenses is that if you lose your income, you can use your emergency fund to float you until you get another job.

Another of my very favorites

That being said, three to six months is just a general rule of thumb and you might find you feel more comfortable with nine months or even a year’s worth of living expenses. If you’re panicking that a year is a lot of money to save up–you’re right, it is. However, this segues nicely back to Day 3: How to save more money in (almost) every category of your budget. The less you spend, the less you need to save and the smaller your emergency fund can be.

You can also start with a smaller goal: save up one week, or one month, of your expenses. Anything you can do to put a buffer between yourself and debt is a good start. Don’t worry about hitting the three month or six month total right away–start with what’s actionable for you right now. Add to it as you’re able and be proud of anything you can save, especially in these constrained economic times.

2) High Interest Savings Accounts: An Ideal Spot For An Emergency Fund

Although an emergency fund should be easily-accessible cash, that doesn’t mean you should stash bills under your mattress. It means you should put the money in a checking or savings account, not in an asset that’s hard to liquidate (such as a paid-off house or a 401k). My favorite home for an emergency fund is a high-interest savings account.

I like this one a lot too

A high-interest savings account gives you money for nothing. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources–your money is just sitting there doing nothing. Here’s an example:

Let’s say you have $10,000 in a savings account that earns 0% interest. In a year’s time, your $10,000 will still be… $10,000.

Let’s say you instead put that $10,000 into an American Express Personal Savings account that–as of this writing–earns 1.60% in interest. In one year, your $10,000 will increase to $10,161.18. That means you earn $161.18 just by having your money in a high-interest account.

And you didn’t have to do anything other than let your money sit there! I’m a big fan of earning money while doing nothing. Keeping your emergency fund in a high-interest account is the easiest way to make it grow. You can read more about high-interest savings accounts in this post: The Best High Interest Rate Online Savings Accounts.

3) Credit Cards: Make Money When You Spend Money

Love my peonies

If you can use a credit card responsibly and pay it off IN FULL every month, it’s a fabulous way to earn rewards, such as cash money. Earning cash back from a credit card is the easiest, least complicated, most slam-dunk methodology for accessing credit card rewards. A “cash back” card means that the credit card company gives you a specified percentage back on all of your purchases. The point of using a cash back credit card is that you’re able to make some money when you buy things you were going to buy anyway.

Here are two cash back cards you might consider. I like these options because neither charges an annual fee and they have pretty high cash back percentages:

Travel rewards are the other major category of credit cards and, while travel might seem like a figment of imagination right now, surely we’ll all travel again one day. For travel rewards, a lot of folks love the Chase Sapphire Preferred.

Some Caveats About Credit Card Usage

Mr. FW and Kidwoods leading the way up into our woods on a family hike

A credit card is not a license to spend with wild abandon. It’s an opportunity to carefully leverage your spending and get cash back or travel rewards. The enormous caveat with credit card usage is that you really and truly need to pay your bill IN FULL every single month. Not the minimum due amount, but the whole entire bill because if you don’t pay your full credit card bill every month, the credit card company applies an interest rate to the amount you didn’t pay. And their interest rates aren’t low either.

Here’s a mantra to remember: If I spend $1,000 on a credit card, I will pay the credit card company exactly $1,000. By the way, it’s a complete and total lie that carrying a balance on your credit card helps your credit score–IT DOES NOT. Paying your cards off IN FULL every month and keeping them open for many years, however, does help your credit score.

I have two posts about how to use credit cards responsibly and to your advantage:

4) Applying for a Credit Card to Access Additional Credit

If you haven’t lost your job, you may want to apply for a credit card/other lines of credit now in order to leverage your employment status and credit score. It becomes difficult to access credit when you’re unemployed, so if you’re still employed, you may want to jump on that.

If at all possible, the best options are to:

  1. Slash your spending and live within (or ideally below) your income.
  2. If you’ve lost your job, ideally you apply for–and receive–unemployment insurance and you avail yourself of other coronavirus relief programs.
Another of my very favorites. Realizing most of my favorites were taken in the fall…

But the best options aren’t always possible. And even if they are, you may want to provide yourself with a buffer and a backstop in the form of additional lines of credit. Having credit available to you could enable you to bridge time before receiving unemployment insurance or could allow you to consolidate other debts to pay them off more easily and a credit card is one way to access credit.

To be crystal clear, I’m not recommending anyone get a credit card in order to go on a wild spending spree to buy things they don’t need. Rather, a credit card can be a form of insurance, though a risky form of insurance since it comes with an interest rate.

In fact, you might not even use the credit card at all! The idea behind getting a card–or an additional credit card–is to provide yourself with options in case things go even further south. Since we’re in a recession, and potentially headed for a depression, having lines of credit open to you might not be the worst idea. If the economy takes another downturn, your ability to access credit might evaporate, so this is kind of a “get it while the getting’s good” idea.

Day 4 Summary:

  1. If possible, save an emergency fund of at least three to six months’ worth of your living expenses
  2. If you can’t hit the three-months-of-expenses goal, save whatever you can. Anything saved is better than nothing saved.
  3. Keep your emergency fund in a high-interest checking or savings account so that you’re earning money from your money.
  4. If you use credit cards responsibly, consider getting a cash back card that’ll give you cash back every month for buying the things you were going to buy anyway.
  5. If you don’t have a credit card–or only have one–consider applying for another card to increase your access to credit. As the economy worsens, access to credit will become more difficult. If you lose your job, it’s tough to qualify for a credit card or loan. If you still have a job, you may want to capitalize on that and get a credit card now.

What questions do you have about the Day 4 exercises?

Here’s a link to the next post in the series: Day 5

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Advertiser Disclosure: Frugalwoods partners with CardRatings for coverage of credit card products. Frugalwoods and CardRatings may receive a commission from card issuers at no extra cost to you.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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  1. I just got the CITI double cash credit card myself!

    On high interest savings, I recently tried something I came across on Financial Panthers blog where you can get 5% interest on $5-10,000! It requires you to open 5-10 accounts since you only get the interest on the first $1,000 but it works and the money is just as accessible as any other online savings. Not for everyone but for me, having $10k earning $500 every year Is worth the hassle.

    1. Nathan, thank you for sharing this Financial Panther blog. I haven’t heard of it before and it seems his niche is side hustle type jobs–exactly what we’re looking for, for my “stay at home dad” husband!

  2. I love my AmEx high interest savings account, that’s where I stashed my savings when saving to buy a home. Now that we’ve done that, I’m building it back up to be our 6 month (or more) emergency savings. I’m way more comfortable when I have my savings buffer; I guess that stems back to being a freelance worker for most of my life. Work could dry up in an instant.

  3. “Anything saved is better than nothing saved” has become my mantra over the last year. I used to never put money into savings because I “didn’t have enough”. Last year I finally decided that a little bit is better than nothing. Only $0.83 left after bills and necessities? That’s $0.83 more than I had before in my savings account.

  4. Marcus (part of Goldman Sachs) has a good high interest savings account and also has no-penalty CDs. With the no-penalty CDs you’ll get a higher interest rate than the savings acct and you can access the money anytime (after 7 days I think) without losing the earnings, unlike a regular CD.

  5. I’ve been very pleased with Capital One 360. I find the online savings accounts are great for setting aside money for property taxes, etc. I also set one up for my daughter’s college tuition (cheap local state college that cost less than the private high school her brother went to. But I digress).

  6. I find it interesting that savings accounts are still considered ‘high interest’. I can remember a few years back (quite a few years) when I was getting 6.75% on an online savings account.. I doubt we will see those rates again for a very long time – if ever.

    1. Exactly! Rates have been so ridiculously low in historic terms, but i guess 1.7% is better than zero for now, and banks can take advantage of the opportunity to market sub-2% as “high interest”! Haha if base rates do ever go up significantly all these “high yield” accounts will probably go by the wayside I’d guess

  7. Great post! I am finding that some previously-high interest accounts have had their rates lowered in response to the crisis, but there are still deals to be had. And something is truly better than nothing.

    Re credit, I have a credit card that I literally have never used, and I literally forget it’s there until I come across it in a drawer, but that is a couple of grand that I could have immediately if I needed it and that helps enormously, psychologically.

  8. I have my emergency fund with SmartyPig (an online high-interest savings account) because it is SO user-friendly, unlike the one offered by Charles Schwab, with whom I have my other investment accounts. The interest rate was 1.75% before the pandemic and is currently 1.4%, which is still pretty good. It’s through SallieMae and FDIC insured so just as trustworthy as any other bank.

  9. We renew our HELOC every time it comes due (now a five year term since the Great Recession). That is a last resort fund and would be used for a catastrophic event such as septic system failure – depending on the interest rate of course. HELOCs now have a floor as well as a ceiling.

  10. What is your strategy for credit cards? Do you each have one in your names only, one joint and you each have a card, or three (each one and an additional one joint)?

  11. I’ve been happy with Citizens Access online savings. That’s where we parked our money that we’re using for our home purchase next month. I’m really loathe to move any of my extra cash these days into any kind of investment (non-emergency fund, long term savings type of cash). What with the state of the economy, plus, with buying a home I’m sure we’ll need to reinvest some of that cash into the home on repairs and the like.

    1. I agree. We’ve been pretty happy with Citizens. I think they’re at 1.5% right now which is a recent reduction.

  12. I use my 3% checking account interest from my CU. Anything up to $15k earns 3% a.p.r. so I try to always have $10k or more in the account. I’ve gone over the limit and don’t get interest on that and that’s fine because then I can use it like a regular checking account on amounts over the maximum interest limit and keep the rest as a savings account with both insured. I recently started a 5% checking account at another local credit union. These are much nicer than the pittance I was earning with savings, but nothing like the 30% or more I’ve been earning on my 401.k which I cashed out end of last year. Seems like I saw the virus coming, but I did not. I wanted a safer option so I could retire this year. I just beat the beating that most accounts took this year. It might pay to look into local or regional credit unions for saving and beat the low rates of the on line and too big to fail monster banks.

  13. What’s your opinion on the new law that allows us to money from an IRA? My husband and I are well prepared to retire at 55, although we are 2-3 years off that. I have been trying to figure out how to take money from our IRA penalty free and this seems like a reasonable option (allows taxes to be paid over 3 years). I recognize that the stock market is down, but some of our holdings are still in the green (amazingly!). I feel like our retirement has us hijacked to keep working a job that we might not need. My husband and I have been semi-retired for 12 years and because of frugal and rural living, our expenses have been low.

    1. Look into a 72t exception. This will allow you to take SEPP, substantially equal periodic payments, from an Ira for the greater of 5 years or until age 59.5. There are a lot of rules, but no penalty for early withdrawals. You do pay taxes on the withdrawals as income. A financial advisor or CPA would be a good resource for more information. Some states give tax breaks on retirement income as early as age 55.

    2. I second the recommendation to look into the 72t rule. This applies perfectly to your situation. You would take SEPP (substantially equal periodic payments) for 5 years (for you, approx age 55-60), and then after that you will have full access to your IRA funds (since you will be over 59.5 years old). I have done a lot of reading about 72t SEPP — there is a lot of information out there, but do not let that dissuade you. Find a good accountant and work with him/her to figure out a plan. You might even be able to retire now! Just depends on how much you have in your IRA’s and if the SEPP would cover your expenses. I like the calculator on If you look at the entire report that is generated when you put your numbers in there, you will see projections that are really helpful.

  14. Big thumbs up for emergency savings, especially if coupled with flexibility (ie the ability to cut costs if needed, even aggressively)

    We retired a few months ago (great timing, eh? 🙂 and I am now super happy with the fact we keep two years worth of expenses in cash. And bear in mind that just a while ago I would have said that 2 years was WAAAY too much!

    Setting the right threshold is clearly very personal. For me, the purpose of the cash buffer is not just to cover expenses for a while; it’s also to delay the moment when we start worrying about things. With 2 years in cash, I think I can start getting worried in about a year, and I know I’ll have still a year covered in front of me. 🤞

    1. Funny, isn’t it, that most would have said you shouldn’t keep 2 years in cash just a few months back? That you’re giving up the opportunity to earn, earn, earn. But now, here you are sitting pretty with a pretty high likelihood that by the time you need to cash in on additional investments, the market will have recovered. You just never know and there isn’t a single right thing everyone can adhere to. Had this event not happened and the market continued with its odd inflated levels (many stocks really seemed overvalued so a correction was surely imminent), then yep… you’d have missed out. Ya just never know! I hear a lot of friends freaking out and selling and bite my tongue. It’s actually a great time to be buying! But again, you need to know your risk tolerance and invest accordingly.

      1. KP, you bring up the difference between saving and investing. Money saved is (essentially) safe. Money invested is (potentially) at risk. Different kinds of opportunities exist for each.
        And ya just never do know!

  15. This isn’t an emergency fund, but one of the techniques we’ve been using to pay down our mortgage faster is to increase the size of our regular payments (which we make every two weeks), rather than make irregular lump sum payments. This is because (at least with our bank in Canada), the extra amount we’re paying with each recurring payment is considered, in effect, an advance payment of the bi-weekly amounts that are due. If for some reason (such as gee, losing a job during a pandemic), we were to have difficulty making our regular mortgage payments, we could reduce or stop our regular mortgage payments for a while without being considered in default, up to the aggregate amount of the extra payments we’d been making every two weeks. (By contrast, lump sum payments don’t count toward the regular amount due on the mortgage, even though they reduce the principal we owe.)

    So, at the moment, we’ve paid nearly $25,000 “in advance” on our recurring mortgage payment obligation, and that will buy us some breathing room if we need it.

    This option isn’t an ideal arrangement for many people, but for us it works. We’re in our mid-50s, and our investments are substantial but we lived abroad for a long time and didn’t own a house during that period. So we are playing catch-up right now in terms of building equity in the home we want to retire in. I also know that I could be tempted to take a little cash out of our savings account, whereas stopping this automatic extra payment on our mortgage takes more effort (i.e. a phone call to the bank). So we are building up a kind of financial cushion to deal with our mortgage if we need it in the future. We also have a regular cash cushion of about 6 months’ expenses (not including our mortgage payments).

  16. I am so weirded out about putting money into an online bank without a local branch. Is this unfounded? My daughter specifically told me about the Discover online savings account. I’m hesitant to put all our savings into it. It’s totally FDIC insured. How do you get past that?

    1. Chelee, I quite understand! I would say to look at online reviews to get a sense of how good their customer service is.
      We have stayed with local banking, but could have savings accounts with credit cards, retirement company, or investment company,. We haven’t switched, partly because the interest is so, so tiny, and partly out of habit.
      Also, think of whether your local banks give back to the community, and if that is of value to you, as they are constantly called on to support local events, activities, children’s teams, cultural occurrences, the county fair, etc., etc.

  17. Build up that emergency fund, that’s my next goal. I am trying to re-align our budget and see where I can start putting some more serious money in the EF. But in the meantime, I have a small amount going in each week automatically, and as stated, that’s better than none at all.

    I have the Citi Double Cashback card, and started putting more purchases on it for that reason (then pay them off, of course), because seeing that “You have $37.60 in cash back rewards” pop up on my page is a beautiful sight. I always use it to reduce my statement amount. I have done a few major purchases that I had the cash to pay for it, then use the cash to pay off the card. Love that cash back.

  18. Do you have any suggestions for teenagers going to university next year how to make some money? It’s probably going to be difficult to get a entry level job any time soon, so we need some creative tips.

    1. Childcare for a family with kids who will be out of school for the summer and the parents both work. My kids are now grown and gone, but we had to figure this out every summer and typically hired high school or college kids who could drive and had a car so that they could take the kids to parks, movies, etc. Our daughter in turn was a “summer nanny” for most summers from the age of 16 to 21, when she finished college. My husband worked in Alaska on floating fishing processors during college. He also went door to door offering window washing services in rich neighborhoods. He got very good at that and made some great money, but you need to make a small investment in equipment and learn how to do it. Of course, the same customers would repeat year after year, so it got easier and easier to stay busy over the summer.

    2. If your teenager has the right temperament (and, ideally, a driver’s license), another possibility would be providing companionship and errand assistance for seniors. There are some services out there like this one:

      While social distancing measures are in place, the services might take the form of phone calls, Zoom meetings and errands (e.g. grocery shopping, picking up prescriptions). Later on, face-to-face meetings might be possible.

  19. Thank you for continuing this series! I’m fortunate to have a secure job, and your post was a kick in the pants to open a high interest savings account. Done. You’re wonderful! Be well!

  20. Thank you for writing this series. When you started it, I did some of the tightening belt advice, while being appreciative that we had a very secure job, so it meant just being careful rather than actually necessary measures.

    Yeah, three weeks later, my wife (and sole income bringer) was laid off from her very secure job. Knowing this is here and that I had already taken some of the measures made me feel less panicked. We really appreciate it.

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