An emergency fund is for events that are both unplanned and urgent: sudden job loss, a medical bill, a repair you can't put off. It's not for a sale you don't want to miss, or a yearly cost you simply forgot to plan for — those belong in your regular planning, not in this fund.
A common rule is to hold 3 to 6 months of essential costs (needs only, not your full lifestyle spending) in an account you can access quickly. As a student or early in your career, that number can feel far away — and that's fine. This guideline gives you a direction, not a deadline.
Reaching just one month of essential costs removes most day-to-day money stress. Build to that first, then grow toward 3–6 months over time, instead of treating the full target as the only goal that counts.
An emergency fund needs to be liquid (easy to access quickly) and low-risk — a savings account, not a stock portfolio. This is on purpose: investing usually offers better long-term growth, but that growth comes with short-term ups and downs. Money you might need next week can't be exposed to a market dip — which is exactly why this fund and your investments stay in separate places, doing separate jobs.
Private-sector workers who complete at least one year of service are usually entitled to end-of-service gratuity: 21 days of basic pay per year for the first five years, then 30 days per year after that, up to a cap of two years' total wages. This is useful to know, but it doesn't replace an emergency fund — it's only paid when your job actually ends, and it can take time to arrive. Your emergency fund covers the gap before that.