3-6 months of emergency fund!

As the word ‘Emergency’ suggests, such situations will arise abruptly without any predictability. Such emergency situations will need money which if you do not have, you will be forced to borrow probably at higher rates, increasing financial burden further. In investment planning, the rule of thumb is that one should have at least 3-6 months of monthly routine expenses and EMI payments as near cash so that it could be used in emergency situations. Emergency can arise from many sources such as loss of job and prolonged illness of breadwinner. During such time one cannot skip paying EMI or Grocery bills or School Fees which are extreme basic set of expenses.