<prompt> Human: Ive read that you should have 6-12 months of expenses in your emergency fund, but Im not exactly sure what that means. By expenses, does that mean bills that you necessarily need to pay, or the amount of money you generally spend every month, including retirement contributions?I ask because we have a good amount of cash sitting around right now, but we also have a lot of debt, and were trying to figure out the right way to apportion it all. And the details are pretty messy. Our living situation could go from very cheap to much more expensive, and we have a baby on the way.Our monthly take-home income after taxes and 401k contributions is about 6,700, and we will have about 30,000 cash on hand when our tax return comes in.Our fixed expenses are something like: Car payment: 200 Cableinternetwatergashousehold bills: 250 Phone: 180 Rent: 400 Student loans: 600I think those are all the things we absolutely have to pay right now.The complicated part -- we are keeping expenses low to pay off our student loan debt by living with roommates. So our expenses are unusually low. But when the baby comes July we may have to move. The housemates we have right now are all fine with having a newborn in the house, but one of them is moving out and we dont know if well be able to find another person who is ok with it. If we have to move, we will probably have to pay about 1500month in rent.tl;dr: Have a lot of cash and low expenses, but also a lot of debt and a baby on the way and life might get a lot more expensive then. How many dollars should we keep on hand and how many can we use to take a big bite out of our debt?Assistant: I would say that 6 months of necessary expenses i.e. cutting out things you can do without is a good target. It should cover housing, utilities, cell phone, internet, food minus going out, etc. I like the idea of keeping 6 months of net pay, after retirement contributions, in savings.I dont keep it in cash. I have it in I-Bonds mostly. I have enough credit that I can cover any emergency in the short term, and I am able to pull out the money to pay it off on time from whatever source I take my E-fund out of.Human: Thanks for this. It has been hard for us to figure out our necessary expenses since one way or another theyre going to change a lot after the baby. But like you, we have a lot of credit, including some temporarily 0 cards, so I feel like we could weather a crisis without too much damage.It didnt occur to me keep it in anything other than cash. How long would it take you to liquidate your I-bonds if you needed to? Are they better than treasury bills?  <response>: I-Bonds are by far the best-yielding, currently available, risk-free investments out there.But, for the first year after you buy them, you can not liquidate them. After that, you can liquidate them at a penalty of 3 months worth of interest. After 5 years, you can liquidate them without penalty.Realistically, I keep 1 months worth of income in a checking account. That should cover most emergencies. If something BIG comes up thats not budgeted for I have a separate house emergency savings, then I dont mind paying 3 months of interest to redeem early. If you think you might need to dip into the E-Fund more often, keep more of it in savings checking.I think the bottom line for me is that I am very, very anti-borrowing for anything consumeristic. I will not borrow to pay for a computer, tv, etc. I will borrow for a house, car, or other durable goods knowing that cars depreciate fast, and that you should never borrow a lot to pay for one. The nice thing about I-Bonds is that once you save your emergency fund in terms of expenses, if your expenses are fixed, you will NEVER NEED TO ADD TO IT. It will keep up with inflation on its own.I-Bonds are far better than treasury bills, currently. They pay interest in 2 components, a fixed rate, depending on the market I-Bonds came out in 1998; the highest that this component has ever been was 3.6, and inflation. If you can time the market perfectly, and lock in fixed rates that are above what the future inflation plus variable rate actually is, then do that. Otherwise, this is a great place to sink money if you want it to just not lose value over time. Currently, I-Bonds pay about 1.75, with 0 interest and the full return coming from inflation adjustments. Their return can NEVER go below 0.Im about halfway to converting my E-fund to I-Bonds. Im doing it in 3 stages, to account for the 1-year illiquid period. 