I've divided the cash reserve up into 3 traunches. The first traunch is in a 1% checking account. The next traunch, less likely to be drawn upon, is in an ultra-short term (2-3 month) bond ETF (MINT, 1.35% dividend). The final "overflow" traunch, least likely to be drawn upon, is another longer duration (2 year), bond ETF (LDUR, 1.89% dividend).
My daily spending is from the checking account. If it runs low, I sell enough of the second traunch to cover upcoming cash flow needs. In case of emergency, and I need a more substantial amount of cash, then the option of dipping into the third traunch is available.
As income is accumulated, first the checking account is replenished. The overflow goes into the second traunch. Once that is full, the remaining overflow goes into the third traunch.