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wubbles comments on Open Thread, June 2-15, 2013 - Less Wrong
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Anyone have a good idea of where to park an "emergency fund" type account, and especially resources that talk about this? Most of my money is sitting in a checking account right now, which I have realized is not so good, but I want to keep most of it liquid (and the remainder might not be enough to start an index fund account with Vanguard).
Some banks offer money market accounts, or even a savings account might be a good idea.
I was on the subway the other day and Sovereign Bank had bought up all the ad spots advertising in big print "MONEY MARKET ACCOUNT. 0.6% APY. $100,000 MINIMUM." The interest rate offered on a smaller deposit is presumably less than that, and yet the bank thought this deal would be appealing enough to advertise. This makes a year of "emergency fund" holdings in a money market account approximately worth the change in the couch. I don't see how that's enough of a difference from a checking account to worry about.
Capitol One offers savings accounts yielding 0.75% APY with no minimum deposit. I've used them for over 10 years with no hassles. Your general point about low yields still applies, though.
I would estimate an opportunity cost of 3 hours per year to set up the account, shuffle money around, periodically monitor the balance, and pay taxes on the interest. This opportunity cost will vary depending on how efficient one is with paperwork. Whether this is worthwhile depends on the size of the emergency fund and the alternative options for increasing marginal income via an equivalent time investment.
For what it's worth, a money market fund might also be a good idea. It looks like historically, it has been extremely rare for a money market fund to decrease in value.