This is a common question and an important one. 


The answer will depend on numerous factors:

  • your current income level, 
  • lifestyle, 
  • expenses, 
  • individuals dependent on you, 
  • existing debt, and other such factors. 


But there are some simplified thumb rules that you can follow. 

A person who has just started earning and has minimal responsibilities can build a contingency fund that is equal to their income of at least three-six months. 


However, if you are living with a family including children and dependent parents then an emergency fund equal to 12 months. 


This calculation can get more refined, however these are good thumb rules to follow.