Building and Investing Your Emergency Fund Wisely

September 23, 20237 min read
Building and Investing Your Emergency Fund Wisely
Share on facebookShare on TwitterShare on Linkedin

Key Takeaways

  • Consider starting with a modest emergency fund goal of $1,000 as a buffer while managing monthly bills and other obligations, then build those savings to three to six months of living expenses.
  • One in five U.S. residents have zero emergency savings, and nearly one in three have such savings but cannot cover three months of expenses.
  • If forced to sell stocks to have money for an emergency, it is possible those stocks will be sold at a loss, and such a sale can take several days.

It is essential to have an emergency fund for life’s inevitable unplanned events. It is an important part of financial planning. It is also important to know whether, and where, to invest this money. Here is what you should know about wisely building, and investing, an emergency fund.

The Importance of Having an Emergency Fund

Unless one plans to borrow from a friend or family member, or run up a credit card, for every unplanned event, an emergency fund is necessary. And what if there is a job loss? 

The fact is one in five U.S. residents have zero emergency savings, and nearly one in three have such savings but cannot cover three months of expenses, according to Bankrate.

After all, there are definite benefits to dedicating savings for those unexpected times that occur in everyone’s life. Such a stash can cover:

  • Income loss. It is necessary to be able to get through an income dip without going into debt or doing long-term financial damage.
  • Unplanned medical expenses. Even if medical coverage is in place, such coverage may not take care of all treatments – ambulance transportation or X-rays, for example. 
  • Urgent home repairs. With a house, anything can happen, including a suddenly burst pipe, damaged roof, or broken heating system.
  • Vehicle repairs. Be prepared for if – when — the car breaks down, as well as for maintenance to keep the vehicle on the road.
  • Urgent pet care. When one’s fur baby is ill, the last thing one wants to think about is whether they can pay for treatment.
  • Family emergency. If a family member in another state falls ill or is expected to soon pass, it would be most unfortunate to not be able to travel to see them due to a lack of funds.     

How to Start an Emergency Fund

Consider starting with a modest emergency fund goal of $1,000 as a buffer while managing monthly bills and other obligations. If possible, build those savings to three to six months of living expenses.

So that they can be used right away for unexpected expenses, emergency funds should be easily accessible and also have minimal fees.

Here are some tips for getting started:

  • Establish a budget to understand where and how one’s money is spent.
  • Fix an emergency fund goal. It is best to work toward a clear objective.
  • Establish direct deposit. Doing so eliminates the need to remember to save and to manually deposit checks into savings.
  • Increase savings over time. One way to gradually increase savings is to raise the amount contributed to the emergency fund by 1% until the savings goal is reached.
  • Put aside unexpected income. Put at least part of any windfall into the emergency fund.
  • Use a bank account bonus to kick off savings. Banks often provide cash incentives to new customers for opening a savings or checking account. This cash can be helpful in starting an emergency fund or contributing to an existing one.

Should I Invest My Emergency Fund?

In some quarters, the school is still out on whether emergency funds should be invested. In fact, the long-standing answer has been that they should not be.

There are risks in investing emergency funds, particularly in volatile stock markets. If forced to sell stocks to have money for an emergency, a loss can be incurred, and the sale could also take several days. And while bonds are relatively less volatile, they may take time to sell.

However, there are advantages to investing emergency funds, with some insights recommending balancing accessibility with investment growth potential.

Here are key pros and cons to consider:


  • Potential for high returns. Investment accounts generally pay more than a savings account.
  • Funds may still be easily accessed. This is discussed in more detail in the next section, but there are ways in which funds can be invested that allow easy accessibility.


  • It could take longer to access money. Even for accessible accounts, it could take a few more steps to have cash in hand.
  • The investor could lose money. All investments carry some degree of risk, some more than others. Stocks are particularly risky.

Best Investments for an Emergency Fund

There are ways other than through a checking or savings account that can be used for emergency funds, ways that can earn returns.

Liquid assets such as high-yield savings accounts, money market accounts, and certificates of deposit are ways in which emergency fund money can be invested. Liquidity is key to easy accessibility without a withdrawal penalty.

  • Money market accounts. A kind of checking account and savings account hybrid, a money market account bears interest – between 3% and 4% — and is considered low risk. Some accounts come with a debit card that provides easy fund access.
  • High-yield savings accounts. Frequently available through online banks, this kind of account can provide returns of 3% to 4% as well as easy access through check request, funds transfer, telephone transfer, or wire transfer.
  • Certificates of deposit (CDs). CDs are federally insured and offer longer maturities and higher interest rates. In fact, many 12-month CDs carry 5% APYs and many five-year, high-yield CDs are in the 4% range. Note, though, that account holders usually must pay a penalty for cashing out a CD pre-maturity, rendering it harder immediately access cash.
  • Roth IRA. Contributions to Roth IRAs, which earn an average annual return of between 7% and 10%, may be withdrawn without penalty. Generally, money can be withdrawn at any time. But withdrawing too early can trigger taxes and a 10% penalty.

Practical Tips

There are practical tips for managing and growing an emergency fund, including employing strategies such as automated savings, making budget adjustments as needed, and periodically reviewing the fund.

Other tips include:

  • Establishing multiple smaller goals instead of one big one. Reaching a smaller goal – say, a month’s expenses – can provide the motivation needed to keep going.
  • Begin with small, regular contributions. To make sure one’s cash flow is not unduly stressed, set the initial contribution level at a relatively small amount.
  • Keep a lid on spending. Once your emergency fund is on auto pilot and growing, do not fall to temptation to increase spending.  
  • Do not over-save. Once the target goal is reached, begin depositing into an account where it can earn money on its own.  
  • Take advantage of any employer-offered 401(k).

Alternative Investments: Yieldstreet

Alternative assets such as real estate, art, transportation, finance, and marine finance are increasingly popular, as investors seek ways to use capital that are minimally connected to an inherently volatile stock market.

The leading alternative platform Yieldstreet, on which some $4 billion has been invested to date, offers these private-market asset classes and more, with a net annualized return of more than 9%.

Previously, alternative assets had been the exclusive province of the very wealthy. Yieldstreet has worked to democratize such opportunities with the broadest selection of alternative asset classes available. 

When deciding whether to use alternative investments for one’s emergency fund gain a clear picture of how an investment’s underlying assets might produce cash flows and assess situations in which such assets may change in terms of value or vulnerability. Also consider the liquidity of such investments.  

An important factor to consider regarding such assets is diversification. Building a portfolio with varying asset types and expected returns is essential to long-term investing success and mitigates overall risk.

Start Investing Today

Diversify your portfolio with private market investment offerings.

Alternative Investments and Portfolio Diversification

Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. 

Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk. 

In some cases, this risk can be greater than that of traditional investments.

This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.

However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. 

Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10,000.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

In Summary

Establishing and managing an emergency fund is a critical aspect of financial security and financial wellness. Practical investment options include alternative assets, which can also serve the essential purpose of portfolio diversification.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022


No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Plaid, and Footprint and none of such entities is affiliated with Yieldstreet. By using the services offered by any of these entities you acknowledge and accept their respective disclosures and agreements, as applicable.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure