Originally Posted By: Glock-A-Roo
This issue is especially germane to those who use Dave Ramsey's methods of finance, specifically the "emergency fund". That fund has to be immediately liquid and is only to be used for real financial emergencies (medical bills, big home/car repairs, etc). Being immediately liquid means it will yield little or no interest, which means it will be eroded over time by inflation.

The slow loss of value due to inflation might be seen as the cost of the security provided by the emergency fund.

Dave reccomends the emergency fund be in a money market fund (mine's in a so-called "high interest savings" account). This ought to more or less follow short term interest rates, so it should to stay about even with inflation. Granted, it is not where you will make your millions.

What's the alternative? A credit card or HELOC? Lines of credit may be closed just when you need them the most, especially nowadays.
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- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."