I've written a previous post on the importance of having an emergency fund. With so many people loosing their jobs and all the other unexpected things that can happen. I definitely recommend having some money set aside, outside of retirement savings. I currently have one year worth of expenses in case the unexpected happens. I eventually plan to bring this up to two years worth of expenses, just to provide that extra security.
I like to keep my emergency fund in a liquid account,(this means it's easily accessible) so I can have access to it at anytime. I've thought of putting it in a GIC, but GIC terms are usually for 1 year or longer. If I decide to take it out before the term is up, I will be forced to pay a penalty for breaking my term. No thanks!
I currently have my emergency fund in a TFSA savings accounts at ING Direct. It only pays 2%, which is very low, but I don't really look at this money as an investment, just a place to park it in case of an emergency. I would love to earn more on this money, but when doing my research on different saving accounts, most of them were paying less than 2%, unless I lock it in. If you're earning more than 2% on your emergency fund, please let me know where it is. I would love to check it out and share it with others.