A post over at Caitlin's blog, Clutter2Cash, made me ask myself a question:

Is it time to keep my Freedom Account and Emergency Funds separate?

Something has changed in my head lately, I think, because previous to now, the idea didn't intrigue me that much. I was keeping it simple, just pouring everything into ING Direct and tracking the money "separately" in an Excel spreadsheet.

Now, the more I consider it, the more I want to keep the funds at separate banks. I suppose I'm just tired of wondering EXACTLY how much is in my e-fund, and having to pull up one of my many spreadsheets to figure it out. I'd be much more content if I could tell it from a glance at my account list in Quicken.

What I plan to do is this: I'll keep my Freedom Account money at ING Direct(3.4%), and move my Emergency Fund to Emigrant Direct (4.0%).

Freedom Account savings are much more short-term in nature — savings are stored for periods of 90 to 360 days — and I know what I'm getting with ING. Electronic deposits and withdrawals are quick, smooth, and painless.

Emigrant Direct, on the other hand, is still pretty much an unproven entity with me. All I can say about them is that I've heard things. I have zero personal experience with them yet, aside from their account-opening process. Sadly, I can't give them glowing reviews on that.

Anyhow, if I really stretch, I can come up with a few good reasons for physically separating your Freedom and Emergency Fund accounts:

(1) If something happens at one of the banks — a systems snafu or whatever — you'll still have in-a-pinch access to the money at the other account. How likely is this? Probably not very. But I guess it merits consideration.

(2) No need for a spreadsheet to help keep your account balances separate. You'll know the balances at a glance just by checking them online (or thru Quicken or MS Money, if you're being a good little boy or girl and entering transactions promptly).

(3) If you're one of those luminaries who carries The Big Stick and likes to keep $100,000 cash at the ready, well, you'll want to split it up between several financial institutions. There's that FDIC-insurance thing to consider, you know. Why someone would want to keep a hundred grand in a simple savings account is beyond me, but I know there are people out there who do this. (How do I know? Because I've personally seen blue-haired Cadillac drivers with checking-account registers that show balances of $50k to $70k. I am not kidding.)

(4) If the account list at the left side of your Quicken 2005 Deluxe screen still has some white space at the bottom, or if you don't yet have to scroll down in order to view all your accounts, then you're in serious danger of not having enough accounts. So, by extension, what you need are more accounts. I'm pretty sure Quicken says this in their online FAQs. Look for it if you want.

Then get back to Caitlin. It was her idea. :)