2 Things You Should Never Do With Your Emergency Fund

There is no better feeling in the world than knowing you've got emergency savings. It helps you sleep better, you can breathe easier, and if a surprise bill pops up, you have cash at the ready to cover it. I lived without an emergency fund for basically my whole adult life until very recently, and I don't recommend it.

If you're lacking in emergency savings, don't feel bad -- you're certainly not alone. A survey from SecureSave found that 67% of Americans wouldn't be able to cover a $400 emergency from their savings, and this is a staggering reminder of how difficult it is to save money for a rainy day and how many people live paycheck to paycheck. I got out of the paycheck-to-paycheck trap by increasing my income, and it's something I recommend to others frequently. You can't simply budget your way into making enough money, and no, your morning latte purchase isn't to blame.

Ideally, your emergency fund should have enough money to cover three to six months' worth of bills, but any amount of saved cash can help you out of a jam. It's not enough to just have the emergency fund itself, though. You also have to keep your money safe and accessible, so you can cover that medical bill or car repair. Here are two things you shouldn't do with your emergency savings.

1. Invest it

Yes, investing your money is a good way to grow it for the future, and you might assume that putting your emergency fund into a brokerage account and investing it will mean you'll have more money when that unexpected bill pops up. But here's the thing about investing: It's a long-term move.

Over the last 50 years, the stock market has generated an average 10% annual return, but individual years within those five decades have seen stock values fluctuate wildly. If you invest your $10,000 emergency fund and the market takes a dip right before you need the money, you could find yourself locking in losses. And if you've lost your job and that $10,000 was intended to cover three months of expenses, you really need the $10,000. If the value of your portfolio has fallen 20% to $8,000, and you don't have time to wait for a recovery, you'll have to sell at that low because you need the money. Invest for the long term and keep your emergency fund out of the market.

2. Put it into a CD

CDs (certificates of deposit) are actually a great way to keep money safe and growing for a few months to several years. But they do come with a pitfall: If you withdraw your money before the CD term is up, you'll incur a penalty. And depending on how long your CD term is and how long the money has been in the account, you could even lose some of the money you put in, rather than just the interest you've earned.

What should you do with your emergency fund?

Thankfully, you have options for where to keep your emergency fund that aren't a CD or the stock market. These days, a high-yield savings account is the most accessible option for just about anyone -- many of the best ones are offered by online banks, and they're so easy to open. And best of all, your emergency fund will grow in one! As of this writing, the average APY on savings accounts overall is just 0.43%, but high-yield savings accounts are paying 10 times that or more.

A money market account is another excellent option for your emergency fund. You'll get the same higher APY that high-yield savings accounts are currently offering, plus easier access to your money. Most money market accounts come with check-writing capabilities or a debit card -- or sometimes both! Savings accounts often don't come with this, but many of them shine by having no minimum required to open an account (while some money market accounts do require a minimum to open, or to earn the highest APY).

Money in the bank for emergencies equals more peace of mind. So do yourself a favor and keep your emergency fund out of the stock market and CDs.