As our plan to build our savings plan continues to make good progress, I am 1/3 of the way towards building a CD ladder built out of twelve, $500 CD's that expire each month. Using my ING Direct account, setting it up has been easy. As each CD matures, I plan on rolling over money (and interest) into a new 12 month CD.
Why? By agreeing to tie up my money for 12 months at a time, I get a slightly better interest rate on my money.
In an emergency? This money is not the "oh crap" emergency fund that would be tapped first. This money is the "worst case scenario" emergency fund. Should I need to tap it, I would have at least (remember it is growing) $500 available every month. It could go a long way towards paying monthly bills. Of course, there is always the option (a bad one) of taking all the money at the price of a penalty.
Ultimate Goal? Once I get the ladder set up, I plan on adding additional money each month until I eventually have a $12,000 ladder in place.