I agree you should not start building an emergency fund if you have debt. As stated, the rates just don't make sense. But I have found it useful in making ends meet by having at least $1,000 in an emergency fund while you're paying down those installments debts.

Once the debts are taken care of, you can eliminate their minimum payments out of your calculation for the minimum monthly living expenses. So that if your cars and credit cards are paid off, your monthly expenses will lower thus lowering the amount of cash you'd need to have on hand in case of a crisis.

Our family lives on a budget of $1,950 for groceries, gas, eating out, entertainment, insurance/taxes and utilities. Currently, we do have other debts so those minimum payments add up to an additional $900. If I were to base my emergency fund on my current monthly expenses, I'd need to save and hold $17,100 for a six month reserve. BUT, if first I wiped out all debts, I would then only need about $11,700 for six months. Quite honestly, I would feel even safer with a 9-12 month fund. Obviously, I would put this in a higher yielding savings account offering near 5%.