QUESTION: Savings account or fixed deposit — which is better for an emergency fund?

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Creating an emergency fund requires the right choice of tools, among which savings accounts and term deposits are the most popular. Each of these banking products has its own specifics that determine its suitability for storing an untouched reserve of money for unforeseen life circumstances.

For building an emergency fund specifically, a savings account is usually best because it provides fast and unhindered access to money at any time without losing already accrued interest. A classic deposit should only be chosen if you are fully ready to freeze a certain amount for the sake of a higher fixed rate for a long term.

If you are still considering a deposit for part of your reserve funds, strive to follow these practical recommendations:

1. Choose deposits with a short placement term, for example, for three or six months, to regularly review the conditions taking into account the market situation.
2. Be sure to look for offers with a replenishment option so you can add free money there at the first opportunity.
3. Divide the emergency fund into two parts: keep the smaller one in a savings account for instant expenses, and the larger one in a short-term deposit at the maximum rate.

This combined approach allows you to strike a balance between maximum liquidity of funds and obtaining additional passive income from the bank.

QUESTION: Savings account or fixed deposit — which is better for an emergency fund?

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