I have 3 months of basic expense saved. I am reading the expense needs to be atleast 3-9 months. Should I increase the size of this expense to 9-12 months as my next goal since I am thinking emergencies other than loss of job like parent's or my health (which is not covered by my company nor by Government here in Pakistan) could cost a lot more than that.


The usual order of things is

  • 6 months emergency fund
  • pay off debt
  • invest for retirement

After you have a 6 month (or so, you might want to make that closer to a year) emergency fund, you can start putting money away for retirement. I am unfamiliar with investment opportunities in Pakistan, but you may be able to open an account in a foreign broker if nothing local is suitable.

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    I don't have any debt. In 5 years I need a place for myself and my parents so I also want to save for it. – user4884 Dec 27 '16 at 17:09
  • So that would take the place of the retirement savings. Is five years a reasonable time frame to save that amount of money? – zeta-band Dec 27 '16 at 17:19

The appropriate size of the emergency fund can be different for different people in different circumstances. Recommendations range from 3 to 12 months of your expenses.

If you are young with few family responsibilities and you think you would have a relatively easy time finding a new job if you lose your current job, you can get by with a smaller emergency fund. If, on the other hand, you have a lot of family depending on you and you think that it could take some time to find new employment should you lose your job, you would want a larger emergency fund.

If you don't have any medical insurance coverage through your job or your government, you definitely want to have a larger emergency fund to cover those types of expenses.

Once you have your emergency fund where you want it (and you are not in debt), you are now free to save for whatever goal you have. Saving for retirement is an important goal, as is saving for a house or a car.

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