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Emergency Fund in Money Market Account

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  • Avatar Riverman22 
    Participant
    Status: Resident
    Posts: 21
    Joined: 01/05/2018

    I am a resident in a dental specialty who will be finishing up in May and beginning my first job in June.  As of now my emergency fund is really only ~2k in a savings account because  I was making very little money during residency.  Based on what I have gathered from the WCI, I plan to open a money market account at Vanguard where I have mine and my spouse’s Roth IRA accounts as well to begin funding a more respectable emergency fund.  Just wondering why money market funds are good for this purpose?  Are there no taxes for taking money out of it even though it is a brokerage account?  Am I able to freely deposit and withdraw money like a savings account?  Any clarification would be greatly appreciated.  Thanks.

    #202094 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 948
    Joined: 02/11/2019

    Right now the MMF at Vanguard is offering rates just as good as the high yield savings accounts online.  I was already using Vanguard as you are and for me it was just easier to plop my E Fund in the Prime MMF then open an account at Ally or similar.

    Just like a bank account you are taxed on your interest but not on what you take out.  Some of the MMFs have some tax advantages but their yield is lower and you would have to run the numbers in your situation to see if it is worth it.  I doubt it would be worth it your first year post training though.

    You can deposit and withdrawal as you please.  I am not sure if there is a limit but if there is it has not effected me.

    Best of luck!

    “Never let your sense of morals prevent you from doing what is right.”

    #202096 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 753
    Joined: 03/09/2017

    Here is a good recap:

    Which Vanguard Money Market Fund?

    You’d have to run the numbers to see what is convenient in your tax bracket and the state you live in. I use VUSXX but it has a $50,000 minimum.

    #202100 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3789
    Joined: 01/08/2016
    You can deposit and withdrawal as you please.  I am not sure if there is a limit but if there is it has not effected me.

    Click to expand…

    usually its 6 withdrawals per month.

     

    #202103 Reply
    Liked by Lordosis
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 948
    Joined: 02/11/2019
    You can deposit and withdrawal as you please.  I am not sure if there is a limit but if there is it has not effected me. 

    Click to expand…

    usually its 6 withdrawals per month.

     

    Click to expand…

    Well that explains why I have never had an issue.  I think that is similar to the high yield savings accounts I looked into.  Either way this is your EFund you probably shouldn’t be withdrawing very often.

    “Never let your sense of morals prevent you from doing what is right.”

    #202107 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2303
    Joined: 09/18/2018

    The funds should be highly liquid, remaining in checking , money market or savings accounts and possibly short term CD’s. These vehicles allow quick access to cash for satisfying household expenses during an emergency situation.

    When building a 3 to 6 month reserve, all doesn’t need to be immediately available. The time it takes to get your hands on it or write a check should be considered. The longer it takes, most likely the higher rate of interest. You are taxed on the interest, not the withdrawal.

    #202112 Reply
    Avatar Riverman22 
    Participant
    Status: Resident
    Posts: 21
    Joined: 01/05/2018
    Splash Refinancing Bonus

    All great information, thank you!

    #202114 Reply
    Avatar Riverman22 
    Participant
    Status: Resident
    Posts: 21
    Joined: 01/05/2018

    I went to fund the account today and realized there are multiple money market funds at Vanguard.  What do you recommend, the Vanguard Federal Money Market Fund (VMFXX)?

    #205501 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3789
    Joined: 01/08/2016

    VMMXX pays 0.1% more.

    #205506 Reply

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