Jonah Perry

For an emergency fund that you may need in 6 to 12 months, first make sure both options are truly safe by confirming FDIC or NCUA insurance and that your balances fit within the coverage limits for your ownership category. Liquidity is the big differentiator after APY and penalties. With high‑yield savings, check ACH transfer speed, same‑bank instant transfer availability, outbound transfer limits, cutoff times, and whether the bank imposes any monthly withdrawal limits. With CDs, confirm whether your bank allows partial early withdrawals or forces you to break the entire CD, and whether the penalty is taken only from interest or can eat into principal on short terms. Rate behavior matters too, since a CD locks your yield while a high‑yield savings rate can drop and may depend on balance tiers or promo periods, and compounding frequency can vary slightly between institutions. Operational details often decide convenience. Look at minimum opening deposits, whether a CD is add‑on or bump‑up, and avoid callable CDs for emergencies because the bank can end them early if rates fall. Be careful with brokered CDs since the only way out early is to sell on the market, which can mean a loss even though they are FDIC insured if held to maturity. For access, pick a savings account with fast funds availability and link it to your checking for instant transfers when possible, and verify mobile deposit limits and holds. For CDs, note the exact maturity date, grace period, and auto‑renew default and set a reminder so you are not rolled into a new term by accident. Many people split the difference by keeping one to two months of expenses in a high‑yield savings account for immediate access and putting the rest in a 3 to 6 month CD or a small ladder, and remember that all interest is taxed as ordinary income each year.

Build cash first. Hit at least one month of expenses while paying the loan minimum, then dump the extra into the car until it is gone. After payoff, push the fund to two or three months.