The Federal Reserve recently said it would continue its zero interest rate policy through late 2014. The SEC proposed new regulations on money market funds. This combination of actions will keep short-term yields as low as a snake’s belly and make it harder to earn a positive real yield or even preserve the purchasing power on your safety funds and emergency cash.

The SEC has spent three years mulling which changes should be made in light of the 2008 financial crisis and the chaos it created in money market funds. It wants to require the funds or their sponsors to have a capital reserve of 3% of the fund assets. That would further reduce yields on the funds. Most MMF sponsors already are waiving all or most of their fees to give investors some positive return. The average yield on a prime MMF now is 0.03% and 0.01% for a government-only MMF. After taxes and inflation, that’s a negative real yield.

In addition, the SEC proposes that investors who want to redeem all of their MMF balances would receive only 95%. They’d have to wait at least 30 days for the other 5%. The days of MMFs as checking account substitutes likely are over.

You can earn more in bank and credit union products, but not much more. Less than a year ago a number of credit unions and small banks that offered high yield checking accounts paying 2.5% or more on at least part of the account balance. These deals came with a number of restrictions and most aren’t available at all now. You can see the few available at www.depositaccounts.com by checking under Reward Checking Accounts. The highest yield is 3% from Inova Federal Credit Union in Indiana on up to $20,000 and Bank of Blue Valley in Kansas on up to $25,000.

Even previously widely-promoted high-yielders, such as ING Direct, are paying average yields on checking. The highest checking account yield available today, according to bankrate.com, is 0.99% from AloStar Bank of Commerce located in Alabama, and that requires a $100,000 minimum balance. You can get in the 0.80% and 0.90% range with low or no account minimums from a number of internet banks, including ally bank, Discover Bank, and ING Direct. The national average is 0.13%.

In the mid-Atlantic states, CapitalOne Bank is offering a high yield checking account that guarantees 1% interest on the first $100,000 balance and 0.60% to 1% on additional balances for at least 12 months (from Feb. 9).

TD Bank, in areas where there is one, offers to waive fees on checking accounts for depositors 62 and older. Local bank checking accounts generally offset their interest rates with high fees unless you have offsetting high balances or a mortgage with the bank.

You earn a slightly higher return by stretching out to a one-year certificate of deposit. The highest yield is 1.15% from Doral Bank (which bankrate.com gives one star out of five for safety). CIT Bank pays 1.08%, and ally bank pays 0.99% (not much different from its checking account). You don’t even increase yields at these banks by choosing a jumbo CD with a $100,000 minimum deposit. Going out to a five-year CD increases the yield only to a maximum 1.85% at Nationwide Bank. That’s not worth tying up your cash for the additional four years.

Savings bonds and treasury bills pay similarly paltry yields.

To earn a little higher yield you can put money in a short-term bond fund or ultra-short term bond fund.

I recommend most people have a safety fund that is large enough to cover two to five years of expected spending. Surveys indicate that many people now are keeping more than that in safe investments. I’ve always recommended that with these funds you emphasize safety and liquidity over yield and return. But most folks want to at least preserve their purchasing power and don’t want to earn the negative real return available in many safe investments.

What’s a saver to do? I recommend the following pyramid.

Immediate spending needs should, of course, be in a checking account or an account that can be accessed with a debit card. You might not be able to earn much interest on this money, but you shouldn’t be paying high fees. If you’re not bundling enough services at your bank to qualify for free checking, ask about a basic account with monthly fees of $5 or less. Most banks offer such an account.

As an alternative, many brokers have an affiliated bank with good deals. Charles Schwab Bank, for example, charges no monthly fees and requires only a $1.00 minimum balance. It pays 0.15% interest and covers ATM fees and online bill paying. The downside is that it’s an internet-only bank. That shouldn’t matter unless you deposit paper checks and don’t want to do it through the mail.

For the rest of the safety fund I urge you not to reach for yield. That involves taking more risk, and over time you’re likely to lose more than the excess yield. This is your safety fund, so keep it safe.

You can get a slightly higher yield by using a bank money market account. These have some restrictions, such as allowing only up to six withdrawals per month. But you can work around them.

After that, there are several ways to seek a slightly higher yield. You can build a ladder of CDs by putting equal amounts in CDs that mature in one, two, three, and four years. Each year a CD will mature. You can shift that balance into a checking account or invest it in a new four-year CD. If you anticipate interest rates rising within four years, you won’t want to lock in today’s yields for as long as four years. Today, there’s very little yield difference between one-year and four-year yields and so there’s little advantage to locking in the longer CD.

Your broker might offer brokered CDs that might pay higher yields than available from commercial banks. But check out all the details. These often have more severe penalties for early distributions or don’t allow early access at all. I don’t recommend index CDs, offshore CDs, or callable CDs for your safe money. I’m also not recommending prime loan funds or tax-exempt bond funds for your safe money.

I don’t see an advantage in money market funds over bank products these days unless there’s a convenience factor for you.

If you want to take some risk with your safety fund to earn a higher yield, instead of CDs consider a short-term or ultra-short-term bond fund from a mutual fund group. These generate higher yields, with recent SEC yields ranging from 0.75% to over 4%. But be sure you know the risks you are taking. You might not have all your principal returned, much less an additional return, if things don’t work out right.

There are over 500 of these bond funds available, according to Morningstar. The average effective duration on them can range from a few months to almost four years. The longer the duration the greater the risk you take from an increase in interest rates. The credit quality of the funds also varies, with some purchasing lower-quality debt to earn higher yields. Some of them also use derivatives, synthetic investments, and complicated strategies to generate higher yields.

Seeking higher yields in short-term bond funds can backfire. In 2008, almost 100 of these funds had negative total returns. Most of them lost 4% or less and made back all or most of that the next year. But some lost 9% or more.

If you choose this route invest with one of the larger, conservative fund families such as Vanguard, Fidelity, T. Rowe Price, BlackRock, or PIMCO.

FPA New Income actually is the best of the group. It’s never had a losing year and is very conservative. The problem is avoiding its 3.5% front-end load, which generally is possible only by using a financial advisor with the right broker, and there might be a redemption fee for sales made within one year.

Vanguard Short-Term Bond Index looks next best to me and is the best option for most investors. Vanguard Short-Term Investment Grade also is good but is more volatile. I’d avoid Fidelity Ultra-Short Bond. It incurred steep losses in 2007 and 2008 from which it hasn’t recovered. DoubleLine recently started Low Duration Bond fund that looks promising but is only a few months old.

Until the Federal Reserve allows interest rates to return to normal, investors need to search for the best ways to invest safe money. Your first priority is eliminating fees on checking accounts. Your next priority is preserving the purchasing power of money you won’t need for about a year. One-year CDs or bank money market accounts probably are the best choice for this money. Longer-term safe money can be put either in the same investments or, if you want to take a little more risk to earn a higher yield, in short-term or ultra-short-term bond funds.