Set aside an emergency fund equal to 3–6 months of living expenses in a readily accessible account

Keep 3 to 6 months’ worth of living expenses in an account you can withdraw from at any time. This way, if you lose your job or fall ill, you won’t have to borrow money at an 18% annual interest rate, nor will you need to sell your investments at a loss. Deposits in banks are protected by deposit insurance, which covers up to 500,000 RMB per bank in China.

There is no direct monetary cost. The trade-off is forgoing higher returns; the funds must be kept in a checking account, money market fund, or any deposit account that allows immediate withdrawals. The real challenge lies in resisting the urge to dip into the fund while saving it up.

An emergency fund eliminates the need to borrow money or sell investments at a loss during unexpected events like job loss or illness. For details on the minimum annual interest rates for consumer loans and credit card payments, see Section 7 of this chapter (which advises against relying on minimum credit card payments).

The recommendation to save 3–6 months’ worth of expenses is a widely accepted guideline, but no official or academic sources have been identified to support it, hence the C grade. The required amount should be calculated based on your regular monthly expenses, not your income. This information does not constitute investment advice.

国务院 (2015). 存款保险条例（国务院令第 660 号，第五条）. https://www.gov.cn/zhengce/content/2015-03/31/content_9562.htm