Good yield vs. safer route (Checking vs. Savings)
In the US bank or credit union checking, savings, CD's are insured through FDIC or NCUA. The coverage is for $250,000. This limit can be increased by having multiple accounts. You, your spouse, and a Joint account with your spouse, are considered 3 different accounts, so you could have $750K coverage.  IRA funds are considered a separate pot of money for insurance coverage. Here is an explanation from NCUA and FDIC. There is no safety difference between savings and checking. There are differences regarding minimum balances, maximum number of transactions per month, and fees. But they are equally safe. There is no difference in safety form the perspective of the bank failing, due to FDIC/NCUA insurance.  However, there is a practical issue that should be considered, if you allow payments to be automatically withdrawn from your checking account  In the case of an error, all of you money may be unavailable until the error is resolved, which could be days or weeks.  By having two accounts, this possibility may be reduced.  It isn't a difference between checking and savings, but a benefit of having two accounts. Note that if both accounts are at the same bank, hey make take money from other accounts to cover the shortfall. That said, I've done this for years and have never had a problem.  Also, I have two accounts, one at a local credit union with just enough kept in it to cover any payments, and another online account that has the rest of my savings.  I can easily transfer funds between the two accounts in a couple days. "In personal finance, most of your success is determined by personal habit rather than financial savvy.  Getting in the habit of making regular deposits to your savings account will have a much larger effect on your situation than worrying about which account pays the highest interest rate (particularly as neither one of them matches the current inflation rate, which is over 3%). So go ahead and put your money in a savings account, but not because of the interest or safety, but because it's a ""savings"" account."
Actually the Fidelity hypothetical example (with same marginal tax rates) is super misleading.  They are putting the money saved up front from the traditional 401k in to at taxable account. Why? If you put the actual money used for the Roth that would be saved into traditional 401k they look the same no matter the timeline (with a hypothetical unchanging tax rate). Check this out.  So there are only two things to consider when choosing traditional vs roth. "I've got a Chevy Bolt, and can confirm that handling is much better when the weight is down low in the center. I've never driven a car like it, and it doesn't even have the ""best"" handling type of suspension.  As far as moving parts go:  Report from a teardown, comparing the Bolt to a conventional VW Golf. http://www.advantagelithium.com/_resources/pdf/UBS-Article.pdf  Powertrain findings (Bolt vs. Golf):  * Moving parts - 24 vs. 149 * Moving parts in engine - 3 vs 113 * in gearbox - 12 vs 27 * other moving parts - 9 vs 9 * Wearing parts - 11 vs 24 * Moving and wearing parts - 0 vs 6  * Total - 35 vs 167  They found the Bolt requires no maintenance or replacement of these parts over the life of the car." I've read the answers and respect the thought behind them.  I'd like to focus on (a) the magnitude of the emergency, and (b) the saving rate of the people affected. 3-6 months is interesting. It's enough not just to fix the car, repair the A/C, etc, but more than enough to lose one's job and recover. (Let's avoid the debate of how long it take to find a job, no amount of 'emergency savings' can solve that.) If one is spending below their means, any unexpected expense that can paid off within, say 3 months, doesn't really need to tap emergency funds (EF). And, at some level of income and retirement savings, one can more easily run a much lower EF.  My own situation - I had 9mo worth of expenses saved as EF. We were living well beneath our means, and I was looking at the difference between our mortgage (6%+) vs bank interest (near 0%). I used the funds to pay down principal, refinanced to a lower rate, and at the same closing got a HELOC. The psychology of this is tough, it then appears that for simple expenses, I'd be borrowing from my HELOC. On the other hand, the choice was between a known cost, the $5K/year the money was costing by sitting there plus the lower rate by going to a non-jumbo loan at the time, vs the risk of using 3% money from the HELOC. In the end, the HELOC was never tapped for more than a small portion of its line, and I never regretted the decision. Ironically, it's the person who isn't saving much that need the EF most. If you are a saver, you need to judge how long it would take to replace the funds.  I offer the above not as a recommendation, but as devil's advocate to the other excellent advice here. All cash flows are a choice, $100 going here, can't go there. I'd slip in a warning that one should capture matching 401(k) contributions, if offered, before funding the EF. And pay down any high interest debt. After that, the decision of how liquid to be is a personal choice, what worked for my wife and me may not be for everyone. "Two typical responses to articles/surveys making such claims:  **1. People use other forms of asset for emergency savings because interest rates are low - clearly false.**  **2. People use other forms of saving than a saving account therefore such surveys as the X% can't handle a $500 emergency are wrong on their face - this is false the vast majority use a savings account.**  I've chosen a topic that absolutely annoys the shit out of me every time it comes up, how people save their money. Every time this topic comes up about X% of americans can't come up with $Y dollars in an emergency or have less than $Z in savings someone inevitably chimes in with the linked response. I have *never* seen anyone attempt to source their hand waving response beyond their own anecdote, which is usually a thinly veiled brag about how financially savvy they are with their wealth. Perhaps people who have no assets, or crippling debt don't go out of their way to brag about it...  I could link multiple reddit posts making a similar response, which I address with my own stock response about once every 1-2 months. Instead I've decided to expand with data from several other sources. This is the prototypical good/bad research problem. If you're asserting something, but qualify your statement with, ""I""m sure we'd find...if we looked into..."" then you're doing it wrong. A good researcher or journalist doesn't put bullshit like that in their work because it's their job to actually look for sources of data; data which should exist with multiple government and independent groups. So let's get started (all data as recent as I could find, oldest source is for 2010):  * [Most americans don't invest in the stock market](https://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf)  About 48.8% of americans owned publicly traded stock directly or indirectly, with a much smaller percent (13.8%) owning stock directly -  pages 18 and 16 respectively. It's important to note the predominance of indirect ownership which suggests this is mostly retirement accounts. It's entirely possible people are irresponsible with their emergency savings, but I think it safe to say we should not expect people to *dip into their retirement accounts* for relatively minor emergency expenses. The reason is obvious, even if it covers the expense they now have to make up the shortfall for their retirement savings. This is further supported by the same source:  &gt;""The value of assets held within IRAs and DC plans are among the most significant compo-nents of many families’ balance sheets and are a significant determinant of their future retirement security.""  Ibid (page 20, PDF page 20 of 41)  There is also a break down of holdings by asset type on page 16, PDF page 16 of 41.  * [This data is skewed by the top 10% who keep more of their wealth in different asset types.](http://www2.ucsc.edu/whorulesamerica/power/wealth.html) For a breakdown between the 1st, 10th, and 90th percentiles see **table 3.**  So far it seems pretty hard to maintain a large percent of americans have their wealth stored outside of savings accounts, mattresses aside.  * [Here's my original reply as to the breakdown of americans assets by type and percent holding.](https://imgur.com/a/DsLxB) Note this assumes people *have* assets. [Source for images/data.](https://www.census.gov/people/wealth/data/dtables.html)  Most people use savings accounts, with runner up falling to checking accounts. This will segue into our next topic which is the problem of unbanked/underbanked households.  * [A large number of individuals have no assets; breaking down by asset types assumes people *have* assets in the first place.](https://www.fdic.gov/householdsurvey/)  To quote the FDIC:  &gt;*""Estimates from the 2015 survey indicate that 7.0 percent of households in the United States were unbanked in 2015. This proportion represents approximately 9.0 million households. An additional 19.9 percent of U.S. households (24.5 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system.""*  That's right there are millions of households *so finance savvy* they don't even have bank accounts! Obviously it's because of low interest rates. Also, most people have a checking account as well as savings account, the percent with ""checking and savings"" was 75.8% while those with ""checking only"" were 22.2% (page 25, PDF page 31 of 88). It's possible in some surveys people keep all their money in checking, but given other data sources, and the original claim this fails to hold up. If the concern was interest rates it makes no sense to keep money in checking which seldom pays interest.  This survey also directly addresses the issue of ""emergency savings"":  &gt; *""Overall, 56.3 percent of households saved for unexpected  expenses or emergencies in the past 12 months.""* (page 37, PDF page 43 of 88)  Furthermore:  &gt;*""Figure 7.2 shows that among all households that saved for  unexpected expenses or emergencies, savings accounts  were the most used savings method followed by checking  accounts:* **more than four in five (84.9 percent) kept savings  in one of these accounts.** *About one in ten (10.5 percent)  households that saved maintained savings in the home, or  with family or friends.""*   Emphasis added.  * [Why don't people have wealth in different asset classes? Well they don't save money.](http://cdn.financialsamurai.com/wp-content/uploads/2014/06/savings-rates-by-wealth-class.png)  This is further supported by the OECD data:  * [Americans ""currency and deposits"" are 13% vs 5.8% for ""securities and other shares"" as % of total financial assets.](https://data.oecd.org/hha/household-financial-assets.htm)  Additionally:  * [Interest earning checking accounts: 44.6% of american households (second image)](https://imgur.com/a/DsLxB)  * [""Among all households that saved for unexpected expenses or emergencies, savings accounts were the most used  savings method followed by checking accounts..."" (page 7, PDF page 13 of 88)](https://www.fdic.gov/householdsurvey/2015/2015report.pdf)  * ~70% saved for an emergency with a savings account vs ~24% who used checking. *Ibid.*  In fairness the FDIC link does state *banked* americans were more likely to hold checking accounts than savings accounts (98% vs ~77% respectively) but that doesn't mean they're earning interest in their checking account. It's also worth noting median transaction account value was for 2013 (this is the federal reserve data) $4100." According to a financial adviser I spoke to, lottery is the riskiest of investments, whereas cash is the safest. Everything else falls between these 2 extremes. It is absolutely worth it.  My wife and I have two of these accounts (different banks).  We are required to use our cards 20 times for one bank, and 15 for the other.  We have yet to miss the required transactions in a month (over 15 months of use now), and are actually considering getting a third account.  Between the two of us, we simply have to use our card on average once a day. Getting gas? Use your debit card. Getting stamps? Use your debit card? Self checkout? Use your debit card twice. Eating out? Use your debit card. If married, split the bill. As soon as we reach the minimum, we stop using the debit cards and switch to credit cards to further boost the rewards.  Maybe it's easier for us since we don't have kids and are out a lot, but 12 transactions is really simple to obtain.  We receive ~$100 a month from our two accounts, all for doing something we already do. "Safe short term and ""pay almost nothing"" go hand in hand.  Anything that is safe for the short term will not pay much in interest/appreciation. If you don't know what to do, putting it in a savings account is the safest thing.  The purpose of that isn't to earn money, it's just to store the money while you figure out where to move it to earn money." You don't mention how much money you are talking about but one option is to use reward checking accounts that are FDIC/NCUA insured. They pay 3-4% interest but generally have a few requirements such as 10-12 debit card transactions and sometimes require direct deposit as well as a limit of 10-50k deposits earning the top rate.