I looked into high-interest savings accounts like Emigrant Direct, ING Direct and HSBC Direct. For a while each had very competitive rates, but I personally don’t want to chase rates by moving my emergency funds around periodically, and over time these banks seem to become less competitive.

Money market mutual funds used to have decent returns, but lately they seem to be paltry.

Someone suggested PenFed CDs to me. PenFed (Pentagon Federal Credit Union) has fairly regularly had competitive CD returns, and their minimum CD is $1,000. The penalty for early withdrawal is generally 6 months or a year of interest depending on the term of the CD. Since my emergency fund target is around $10,000 I liked the idea of buying several $1k CDs for use as emergency funds. I have been doing this for a couple of years now and met my emergency funds goal. Today’s rates aren’t as good as two years ago of course, but they still beat savings accounts and money market mutual funds by far. And they won’t lose value and are insured by the NCUA, the credit union analog to the FDIC. I have a ladder of CDs earning more than my other secure options, and if I have to I can break them in increments of $1k to minimize the forfeited interest.

PenFed’s member requirements are to have been in the armed forces or have a family member who was, but you can also become eligible by buying a one-year membership in the National Military Family Association for $20.

Okay, not everything is gone. BigMoneyJim’s Buzzword Bingo is still active.