Emergency funds are a stockpile of savings that you do not touch unless you're in dire need. Everybody should have an emergency fund. No matter the state of your personal finances, we all need money set aside for a rainy day. If you rely on things like credit cards or loans to pay for the unexpected, you may be digging yourself out of a hole for years to come. The safest way to plan is to remember to plan for the unexpected. An emergency fund allows you to keep penalty-free money on hand that's at your disposal at any time. Let's say you unexpectedly lose your job. Would you have enough to cover basic living expenses? What about your rent or mortgage? How long could you stay afloat?

To get yourself prepared in case of emergency here’s what you need to know:

• The Best Type Of Account To Stash Your Cash. There's not a bank account with the specific “Emergency Fund” label available to consumers. But there should be! To make do until a clever bank offers one, LearnVest suggests that you stash your emergency funds in a high-yield savings account. Remember these typically offer a high annual percentage yield (APY), which means more money for every dollar in your account. You want to find a high-yield savings account with the best APY you can find. That way, your emergency fund will reap the benefits of compounding interest and the returns you make on your investment will have the chance to grow exponentially. In simple terms, you will make more money in interest with a high-yield account than with a regular savings account, which will boost your emergency fund.

LV Hint: Bear in mind that banks frequently change the rates of their high-yield savings accounts. So when you open a high-yield savings account your interest rate is variable, not fixed, and is likely to go up and down with the market. 

Many high-yield savings accounts are available online only, although some banks and credit unions offer them. However, an online high-yield savings account has many benefits that are useful when thinking about where’s best to save for an emergency fund.

• Automated Savings.  Many online banks will let you set up automatic savings. This means that a certain amount of money will be pulled from your account at a time set by you and will go directly into your online savings account. This could be from your checking account or even from your paycheck if it’s direct deposit. With automatic savings you don’t have the opportunity to spend the money as it goes directly into savings. If you know temptation often gets the better of you, automatic savings might be a good option.
• Easy Access, But Not Too Easy.  No, with a high-yield savings account you can’t withdraw money from your online savings at an ATM. This means that the temptation to pick at your savings is eliminated, which is a good thing. However, easy access to your account is important. After all, if you find yourself in an uncertain financial situation you will need a hassle-free way to get to those savings. The best savings account is one that provides the best balance between liquidity and the ability to earn interest on your money. Generally the better the interest rate, the harder it is to liquidate your savings into spendable cash.

With an online high-yield savings account, you can tap into your money relatively easily and quickly by having your money transferred into your checking account. But it takes a couple of days to clear so you don’t have instant access to your fund. If you feel you need greater and more immediate access to your savings you should consider storing your emergency fund in a different kind of account, like a money market account which is just as secure (both types of accounts are FDIC-insured) but an MMA offers a higher degree of liquidity and flexibility.

• Cutting The Fat.  It’s simple. Start tracking your spending for a month to figure out where you can cut back. Then scour over your monthly expenses to get a realistic idea of how much you need to save to cover six to nine months worth of living expenses. With each paycheck, set aside an affordable amount of money for your emergency fund. It can be anywhere from $10 to a couple of hundred dollars, depending on your income.

If you don’t have to think about it, saving becomes a lot easier. Be creative about finding ways to save. Aside from cutting back on luxurious expenses like gourmet coffee and eating out, think about other ways you can build your emergency fund. If you finish paying off a student loan or credit card debt, keep paying the debt installments but this time deposit them directly into savings; you won’t feel a pinch in your budget this way. Stashing a work bonus or tax refund is also a great way to kick start your new saving spree.