this post was submitted on 30 Sep 2023
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It depends on what alternatives I have available. Prior to this year, I was aiming for 3-6 months of liquid savings and the rest in my investment accounts.
Now that reasonable interest rates are available, I have changed my priorities. My goal now is 2 months savings in my checking account. This allows me to cover nearly any expense that comes up without the annoyance of transferring money to cover it.
I keep another 1-2 months of expenses in a MMF earning >4% interest and immediately available for withdrawal.
Then I have a decent amount (no particular target) invested in a short-term treasury ETF (TFLO) earning >5% interest, but it takes about a week to sell and transfer funds if I need it.
Altogether, I'm probably keeping 6-12 months readily available, but most of it is earning interest now. I would also likely get 3-6 months severence if I lost my job and could probably cut back on some expenses to stretch things a bit further.
Finally, I used to contribute to a Roth 401k (I've since switched to traditional 401k), so I should be able to access those contributions without penalty, if needed. This would only be relevant for someone in the US though.
You may be interested in switching your checking to a brokerage like Fidelity or Schwab. Some benefits:
Basically, you'd get better interest in your checking and fewer accounts overall.
I switched late last year and I love it. My structure is:
SPAXX gets just under 5% right now, and it's nuts that I'm getting that in my "checking."