This is a follow-up to my "Will We Have to Pay Banks to Hold our Money?" entry
We decided to move some money to a 5-year CD at WaMu paying 5.00% APY. While some may disagree that a 5-year CD is not a good place for "short-term money," this CD stipulates that there is no penalty if principal is withdrawn due to the death of one or more of the account holders. (It is a joint CD.) We view our EF as a safeguard against 3 types of events: unexpected negative events such as natural disaster or catastrophic illness, major setback in DH's business, or death (of either of us, but for all practical purposes, it really would probably only be needed if DH died). For the first 2 types of events, the money needs to be kept liquid (MMA or short-term CDs). But for the 3rd portion (the "life insurance" part of our EF), the only thing that really matters is that we can get at it without penalty if someone dies.
5.0% is a lot more attractive than 0.5%, which is where rates might be heading.