I'd add to number 4 that being able to borrow short-term cash at a reasonable rate can be a better choice. If you borrow $10k at 1%/month and pay it off at $1k/

I'd add to number 4 that being able to borrow short-term cash at a reasonable rate can be a better choice. If you borrow $10k at 1%/month and pay it off at $1k/month, the total interest is something like $550. If you need that much cash once every 5 years, then that's about a 1% rate of return on holding $10k worth of emergency cash in terms of saved interest fees. That said, this is only really a good option if you've got a healthy income level and strong saving habits. If you don't, you won't be able to borrow at a reasonable rate (and you won't be able to pay it back quickly).