Speaking about emergency fund, how big should it be? There are different opinions on this. Some people say that you should make it at least 3 months of your living costs, while others say it should be 6 or even 12 months.
Of course, the bigger your fund is the better from the emergency perspective. Why? Because you will have more cushion in case something unexpected happen. Having 12-months-worth emergency fund will give you more room to breathe than 6—months-worth fund.
But, on the other hand, you shouldn’t put too much money into the fund. The reason is that you will get better return on the money if you invest it. So you should put just enough money into your fund and invest the rest of the money you have.
While there are different opinions about it, I’d say 6 months is a good number to aim. It’s not too much, but it also gives you enough room to breath if something unexpected happen. If you got laid off from your job, for instance, you will have full 6 months to find a new job. In the current economy, that will give you enough time to get a decent job.