(InvestigateTV) — Emergency funds exist for life’s unexpected expenses — a blown tire, a plumbing disaster — but where you keep that money matters.
Personal finance expert Joel O’Leary of Motley Fool Money said most Americans keep their money in the same bank account for years, and that’s a mistake when it comes to emergency savings.
“Because you’re going to be tempted to dip into them. And when you’re always looking at a larger balance, it can play mind tricks on you. So, right now, high yield savings accounts are the best place. They’re kind of a no brainer. They’re just like regular savings accounts, except high yield savings accounts pay a higher interest rate,” O’Leary said.
Some of the top online banks are currently offering high-yield savings accounts with interest rates around 4% APY — compared to the 0.01% typically offered by a standard savings account at a large bank.
O’Leary said the move can have consumers earning real dollars in interest instead of pennies, with the same level of safety as a regular savings account.
He added interest rates can vary significantly from bank to bank, making it important to shop around.
“The headline feature is getting a high interest rate because you want your money working as hard as it can for you, but that can vary a lot from bank to bank. So, it’s important to shop around. Monthly fees are a pet peeve of mine, so I always recommend working with a modern online bank that just doesn’t charge any junk fees,” O’Leary said.
Consumers should also confirm any account is FDIC insured, which protects funds if the financial institution fails.
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