I-bonds or money market for Emergency Fund?

[LovesLife]

Alec,

Thanks for the info. You are as helpful as always.

LL

 

[azanon]

We have a (depleted at this point) Emergency Fund that is in a Money Market Acct.  I'm wondering whether we'd be better off putting this into I-bonds given that the interest is much better and they can be cashed early with little penalty.

Thoughts anyone?  Potential drawbacks?

Depends on what an emergency fund is to you.  For my emergency fund, i demand safety in principle and maximum liquidity of the money.   With a money market fund, you can write a check and pay for the "emergency" on the spot.   I presume you cant write checks on an I bond or I bond fund (unless its a money market fund that holds I bonds).

If you ask me, any kind of bond is an investment, not an "emergency fund" per se as i define it.