How big should an emergency fund actually be
Six months of expenses is the usual advice. I ended up at four, because my job market is reasonable and my fixed costs are low. The size mattered less than writing down the rules.
Counts as an emergency
- Job loss or income drop longer than a month
- Medical or dental bills not covered
- Replacing a laptop I work on
- Travel for a family emergency
Does not count
- A sale on anything
- Holidays, even cheap ones
- "Investing opportunities"
It lives in a separate savings account at a different bank, which adds just enough friction to stop me treating it as spending money.