I moved my emergency fund to a high-yield online savings account, and after earning 20x more interest I'd tell anyone to do the same

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• Forty percent of Americans say they don't have enough money saved up to cover even the smallest emergency expenses.
• Without an emergency savings fund, unexpected expenses could cause people to go into debt and spend hundreds on interest fees.
• I use a high-yield online savings account for my emergency fund, so it's constantly growing until I need it.

What would you do if your car broke down tomorrow and the mechanic told you it'd cost $1,500 to get it up and running again? Or worse, what would happen if you got laid off tomorrow? How long would you be able to pay rent while unemployed?

If you don't have a good answer to these hypotheticals, at least 40% of Americans are right there with you. In a survey done by the Federal Reserve Board last year, four in 10 Americans said they wouldn't have the money to cover a $400 emergency without borrowing or selling something.

But resorting to debt to cover unexpected expenses only leads to more unpaid bills. The average interest rate on credit cards is now at an all-time high of 17.51%, making borrowing an extremely costly option.

The point of all this isn't to send you spiraling into a panic attack. Rather, it's to stress the importance of setting up an emergency fund.

An emergency fund is money you have saved in order to cover unexpected expenses. This means you have money on hand to cover anything from a medical emergency to car repairs to a month of overspending during the holidays. Essentially, building an emergency fund is the first step to not living paycheck-to-paycheck.

A high-yield savings account helps you get more from your emergency fund

While your regular savings account will work, a high-yield savings account will earn you significantly more money in interest. This helps you grow your emergency fund faster and gives you a nice little reward for saving your money instead of spending it.

High-yield savings accounts are just like regular savings accounts, except that they offer higher returns on your money. While a savings account with a large traditional bank might only offer a 0.01% interest rate, most high-yield savings accounts usually offer at least 2.00%, if not more.

High-yield savings account offers from our partners:

This is a huge difference. I switched over to a high-yield savings account at the end of last year, and I've already earned over $60 in interest over the course of just three months. With my old bank, I was earning less than $1 per month.

Here are some features you should look for when shopping for the best high-yield savings account:

• No fees
• No minimum deposit requirement
• High APY
• Easy to set up online
• Good reviews

The best high-yield savings accounts are typically offered by online banks, so you can open your account in a matter of minutes without even leaving your house. These online banks don't have the overhead cost of running brick-and-mortar locations, so they're able to offer the highest rates and the lowest fees.

My favorite places to park an emergency savings fund are easily Ally Bank and Synchrony Bank.

Both banks are FDIC-insured, and both high-yield savings accounts are completely free.

Choosing an account with no monthly service fees is important because fees eat into your returns. Neither Ally nor Synchrony requires you to keep a minimum balance in order to use their free high-yield savings accounts. They also don't require you to make any minimum deposit in order to open an account, so they're great for beginners.

Of course, the most important feature is the rate that's being offered. Ally currently offers 2.2% APR and Synchrony is offering 2.25% APY [as of February 15, 2019], which is in line with the highest rates you can find and 20 times higher than the national average on savings accounts. With a $15,000 balance in either of these accounts, you'd earn about $330 in interest the first year.

The biggest difference is that Synchrony Bank's high-yield savings account comes with an ATM card so you can access your funds quickly. However, if your goal is to save rather than spend, this might be a drawback. On the other hand, Ally offers 24/7 customer service, whereas Synchrony has more limited hours.

How to start an emergency fund, even if you live paycheck-to-paycheck

First, you want to set a goal for how much money you'll keep in your emergency fund. If you're paying off high interest debt, like credit cards or student loans, you might want to stop at one month and focus on becoming debt-free before you continue saving.

Once you're ready to go full-throttle on your emergency fund, most personal finance experts recommend that you have at least three to six months of living expenses saved up in an easy-to-access savings account. This should cover you if you became unemployed: The typical (or median) length of unemployment is a little over two months, while the average is about five months, according to the US Bureau of Labor Statistics. 

Read more: I use the free version of Personal Capital, a financial planning website, every month - here's why I can't stop

Keep in mind that if your income is unstable - for example, if you work seasonally or as a freelancer - you'll want to err on the side of caution and keep six months of living expenses handy, at the very least. Some experts recommend having a full year's worth saved up. 

If you tend to need all of the money you make each month, remember that starting small is better than not starting at all. With free high-yield savings accounts that can be opened online in minutes, there's no reason not to start your emergency fund today. Even if you can only afford to deposit a few dollars to start, you'll be on your way to a more stable financial future.

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