Six months' expenses?!?
I'd favor six months of mortgage payments & groceries, or maybe six months of austerely-budgeted expenses, but not six months of your average budget's spending.
Envision losing your job. Do you say to yourself "Well, at least I can spend more time with the family doing the things we enjoy. Let's double the entertainment budget!!" or "Hey, I finally have the time I need to go SUV shopping!" or do you say "Whoa, clamp that wallet shut."
With today's interest rates I'd even consider financing that emergency cash in home equity loans or credit cards.
But aside from slashing spending to the bone, the best cash-stash suggestion I've seen is I bonds or CDs. Buy one or ladder them over a couple of years, and only cash them in when you absolutely need them. You'll take an interest penalty but you'll fund that emergency with zero percent interest.
As some of us have noted before, the real epiphany is slashing expenses and realizing that they've dropped below 4% of your portfolio. THEN what do you do?!? ER on a frugal lifestyle or go find another means of supporting your possibly frivolous spending?
The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
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