Saving an entire year’s salary might seem like a great idea, but it goes beyond what’s typically recommended for an emergency fund. For most people, it’s not necessary to put aside that much in liquid cash. While having 12 months of expenses saved is certainly safe — and may be suitable for individuals with high risk or volatile income — it often ties up money that could be better used for other financial goals, like investing or paying down high-interest debt. A 3 to 6 month fund strikes a more practical balance between safety and efficiency. If your emergency fund is too large, you may be missing out on potential growth by leaving funds in low-yield savings accounts unnecessarily. The key is to prepare without over-allocating. After reaching your emergency goal, it’s wise to funnel extra savings into higher-return assets for long-term wealth-building.