While saving up a large, five-figure amount of money in the inflationary economic climate of recent years was certainly challenging, savers did have one factor working in their favor. Higher interest rates on everything from high-yield savings to money market accounts and certificates of deposits (CDs) helped these savers boost their bottom line in a way that was simply unachievable in the ultra-low rate environment many experienced at the start of the decade. But now, years later, knowing where to store a large sum such as $40,000 is arguably as important as knowing how to build it. And, if you're looking to keep this money in an emergency fund, the location is even more important.

The reasons for needing an emergency fund in today's economy, too, are pronounced. With inflation now at its highest level in three years, elevated interest rates making borrowing more expensive and U.S. wage growth lagging, it's critical that your $40,000 be stored in both an accessible and profitable location. But only some savings accounts can accomplish both goals. Right now, there are actually two clear choices for where to keep a $40,000 emergency fund – and two where savers may be better served avoiding. Below, we'll examine all four options in detail.

See how much interest you could be earning on your money with a top savings account here.

Where to keep a $40,000 emergency fund right now

Here are two profitable (and safe) options in which to keep your $40,000 emergency fund now:

A high-yield savings account

High-yield savings accounts operate just like traditional savings accounts do, albeit with interest rates multiple times higher than those of traditional accounts. If you take the time to shop around online, you can find an account with a rate close to 4% right now. But you'll still be able to make additional deposits to the account or withdraw from it as needed should a financial urgency arise. 

High-yield savings accounts are also FDIC-insured up to $250,000 per account, giving you ample protection for your $40,000. And with online marketplaces making it easier than ever to compare rates, accounts and terms in one spot, you can get started now.

Learn more about your high-yield savings account options here.

A money market account

While a money market account may be less familiar than a high-yield savings account, it can also be a viable home for your $40,000 emergency fund now. This account comes with a similar rate to the top high-yield savings accounts while also allowing savers to write checks from the account as needed, helping to streamline their banking needs. 

Like high-yield savings accounts, money market accounts have rates around 4% now, though the rates on both are variable and subject to change based on market conditions. But with the likelihood of an imminent interest rate cut very low right now, savers can still grow their money with relative ease while maintaining access as needed.

Where to avoid keeping a $40,000 emergency fund right now

While the following two accounts can be advantageous for savers in some circumstances, neither makes for a viable home for your $40,000 emergency fund now:

A CD account

CDs have interest rates comparable to the best high-yield savings and money market accounts. And, unlike those alternatives, rates here are fixed and will hold through the account's maturity date. The issue with using this account type as an emergency fund, however, comes down to accessibility. 

To earn that elevated rate, you'll need to keep your funds locked in the account until the maturity date hits. Take it out early to pay for an emergency bill or repair, and you'll get hit with an early withdrawal penalty that can erase all of the interest earned to date. In short, CDs can be smart homes for your money, just not for money that you may need urgently.

A traditional savings account

With a traditional savings account, you'll maintain access to your money, not have to worry about early withdrawal fees and benefit from any rate hikes ahead as the account has a variable rate responsive to market conditions. 

The bad news? The average rate on the account is just 0.38% now, making all three of the aforementioned account alternatives exponentially more profitable. So while you may currently have your $40,000 sitting in this type of account, know that you're losing money (and failing to keep pace with inflation) by not making the shift into a high-yield savings or money market account instead.

The bottom line

If you did the hard work of saving $40,000 for your emergency fund, it's worth going one step further to ensure that the money now works appropriately for you. With a high-yield savings or money market account, it can. But with a CD, thanks to the accessibility restrictions the account comes with, or a traditional savings account, thanks to the minimal interest-earning potential, it won't. Evaluate all four carefully, then, but don't wait too long to act either, as you can easily be earning more interest – and growing your $40,000 further – with alternative account types now.