<prompt> Human: An emergency fund has two qualities:1. Protection of principal. You do not want to take a risk with your emergency fund.2. Liquidity. You want to be able to get your money when you need it most.Anything that has these two qualities can be used as an emergency fund. Here are the best three options I can think of. I would love to hear your opinion on them or if you have any other ideas for where to keep your emergency fund.---Short term bond index ETF 3.35 1-year return last year. However if interest rates go up, this investment can do down. This is only a really big problem for long-term bonds. Short-term bonds are the most resilient to interest changes.I-bonds They pay 0 above inflation since 2010. If that ever changes you can simply sell your I-Bonds and buy them back. Historical inflation rates are in that link. You can cash out any time after 12 months. So you can stagger your savings to always have some cash available. If you withdraw before 5 years you lose 3 most recent months of interest. You do pay federal but not state income tax on IBonds so you dont truly match inflation.High Yield Savings Account -- It looks like 1 is the best you can do here.Assistant: cd ladderHuman: Could you explain this?Assistant: Today you buy a 5-year CD 2 interest with 1,0001 Year from now you buy a 5-year CD with 1,0002 Years from now you buy a 5-year CD with 1,0003 Years from now you buy a 5-year CD with 1,0004 Years from now you buy a 5-year CD with 1,0005 Years from now your original CD is cashed out with interest, ready to be reinvested.The trick is that you cannot withdraw from a CD without taking massive penalties, so you stagger your contributions like this while leaving some cash liquid. However this technique only gives you access to about 20 of your emergency fund at any one time, which violates rule 2 Liquidity. I might be getting it wrong though so if anyone can correct me than please do  <response>: Thats one way to do it - what I did was buy 1, 2, 3, 4, and 5 year CD all at the same time, and then each year that one matures move it to a 5 year. The penalties really arent that bad, at least at Ally. It is just 60 days worth of interest. 