Better return on emergency fund

Taken from The Simple Dollar.

I am drooling over having a $10,000 emergency fund!

Better return on emergency fund
My husband and I have have built up an emergency fund ($10,000) in a savings account at our local credit union. We would like to get a better return on our money, but are not sure where to invest it. Is a mutual fund a good option? Do you have any recommendations, or at least know of a resource to start looking?
- Shelley

The purpose of an emergency fund is to have liquid money available whenever you need it. Putting that emergency fund into a risky investment undermines that need.

What you should do is figure out how much you actually need in an emergency fund. It really depends on your situation, but if you’re a married couple without kids, somewhere between two and four months of living expenses is a good number.

Keep that much in savings. Invest the rest, but before you do, figure out a goal for that money. What do you want to do with it eventually? That will help you to figure out how you should invest it (the shorter the timeframe, the safer you should invest).