Every finance article says three to six months of expenses. It is a reasonable starting point and a terrible finishing point, because it ignores the only thing that matters: how likely your income is to stop, and how fast it would come back.

Size it by fragility, not by rule

Start at three months and add for every source of fragility:

  • Volatile or self-employed income — add several months. Your income can halve without you being fired.
  • Single income household — add. Two earners are a diversified portfolio; one is a concentrated position.
  • Specialised job or small market — add. A niche role can take many months to replace.
  • Dependants, a mortgage, or high fixed costs — add. Fixed costs are the reason people sell investments at the bottom.
  • Property you own — add. Boilers and roofs do not wait for a good moment.

Subtract for stability: secure employment, generous statutory sick pay and unemployment cover, low fixed costs, a partner earning independently, or family who would genuinely help.

Base it on expenses, not income

Count what you must spend, not what you earn. In a genuine emergency the holidays and restaurants stop immediately. Use rent or mortgage, utilities, food, insurance, transport, debt payments and childcare. That number is usually much smaller than your salary — which makes the target far less intimidating.

Where it goes

Cash. A savings account you can reach the same day. Not a bond fund, not a "conservative" portfolio, definitely not equities.

The objection is always the same: cash loses to inflation. That is true and it is the point. This money is not an investment — it is insurance that lets your investments stay invested. Its job is to be worth exactly what you expect on the worst day of your year. You do not complain that your house insurance underperformed the market.

The one that gets skipped

If your employer matches pension contributions, take the match before overfunding the emergency fund past three months. An instant 100% match beats any argument about buffer size.

Summary

Three months if your life is stable, twelve if you are self-employed with dependants, and somewhere in between for everyone else. Held in boring cash, sized on your survival expenses — and then left alone.