How much, where to keep it, and why chasing returns on it defeats the purpose.
The purpose of an emergency fund is not growth but ensuring you never have to sell. Without it, a sudden expense forces you to liquidate investments at a loss or borrow at high interest โ and that cost far exceeds the yield given up by holding cash. Once you start judging an emergency fund by its return, its purpose has already been lost.
Three to six months is the usual guidance, measured against fixed monthly outgoings rather than income, since what matters is what still has to be paid if income stops. Less stable income and dependents both argue for more; stable income with low fixed costs can be fine at three months.
It only works if you can reach it immediately. Anything with fluctuating principal or penalties for early withdrawal is unsuitable; an instant-access account is right. Keep it separate from your everyday spending account, though โ mixed together, the boundary blurs and it drains away.
Aiming straight at six months usually ends in abandonment. Hitting a smaller target such as one month first creates the experience of succeeding, and growing from there lasts longer. Automating a transfer on payday is far more reliable than saving whatever remains. If you spend the fund, refilling it becomes the next goal.
Each button runs this keyword on that search engine