where should that emergency money stay stashed? passbook at 2% interest doesn't seem very Foolish.No, a passbook savings account at a bank isn't at all Foolish - get that money out of there and into something that will work for you. A great place for emergency reserve is a money market. We use and love Vanguard Prime Money Market (typically earn 5%+) but you could use just about any money market. Money markets are safe and earn decent interest (for almost no risk). CDs are a safe investment that also earn decent interest, but they're not readily accessible if you need the money in a true emergency, so I wouldn't recommend them for "front line" emergency reserve. Good luck - stay on track and, most importantly, don't give in to the temptation to use that money. Always remember that it's your safety net. Once you hit that 6-month expenses level, make that the bar below which you will not let that account drop unless dire circumstances arise. We finally reached our 6-month expenses level last year and I cannot tell you what peace-of-mind that account gives me!-Blue
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