IMO, the "Emergency Fund" needs to be risked based. Here's roughly how I do it:
Look at monthly expenses and strip out everything that isn't absolutely necessary. I look at this as if the absolute worst case scenario happened (wife and I both simultaneously lose our jobs). This is what we'd need to live on for 6 months. I make sure I have this on hand, accessible to me right away.
Now having said this, I'd like to bring up two points:
This is where the
envelope method of saving is so important. Depending on what your monthly expenses are, and if you build up your envelopes appropriately (i.e. have the complete balance in the envelope prior to spending) - you can theoretically have enough money in your "discretionary spending" envelopes to cover your necessities in the worst case scenario. - this is what I do.
Every situation is different. My wife and I are in completely different industries with completely different skill sets; so I think the chance that we'd both lose our jobs and be w/o employment for 6 months is extremely slim. Also, given our education, skill set, networks, etc - I'm confident we would have some way to create income in the meantime until permanent employment was available.
Also, you need to understand your medical benefits, disability coverage, etc. This all factors in to how much "emergency savings" you need.