How it works
An emergency fund is cash you set aside for unexpected expenses or income loss. It is your first line of defense before investing.
Emergency fund = Monthly expenses × Months
How many months do you need?
Three months is a common starting point, but six months is safer if your income is irregular, you are self-employed, or your job is hard to replace. Twelve months is more conservative.
Where to keep it
Keep this money in a high-yield savings account, not the stock market. It needs to be safe and available immediately — returns are secondary to liquidity.