Direct answer. It depends.
If you google or ask any advisor, they will tell you that it’s advisable to have six months of expenses as an emergency fund. That’s the thumb rule.
You emergency fund is like an insurance. It is meant to protect you in difficult times. Would you want to be over-insured or under-insured? Always remember, everyone doesn’t need insurance. It depends on multiple factors.
Factors On Which The Size Of Your Emergency Fund Depends
Your Net-Worth
If your net-worth is extremely high and is in millions of dollars, do you really need an emergency fund? Heck no. But for someone with a few thousand dollars or half a million in kitty, it is extremely important to have an emergency corpus.Your Sources Of Income
If you are only dependent on just one source of income, you definitely need an emergency corpus. Whereas if your income sources are more than 1, than you can have lower or no emergency corpus. Consistency of income another important factor.Your Debt To Equity Ratio
If you have very high levels of debt vs. no debt has a great impact on deciding your emergency fund.Number Of Dependents
No dependents to a family of four has a great impact on the size of the emergency fund. If you have no dependents, you can have a smaller corpus vis-a-vis having a family where the probability of an uncertain event increases dramatically.Your Lifestyle
If you live a lavish lifestyle, do you believe that you could change your way of living on the day you have an emergency? No. It doesn’t work. Be practical. You need a large emergency corpus to back upon.
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