When Kari Danziger left her job as a genetic counselor in Boston and moved across the country to work for a start-up company in Silicon Valley, she knew she was taking a risk. But at the time the economy was flourishing and she was ready for a change. A little over a year later, in May 2001, trouble hit. The technology sector took a headfirst plunge, and her company went under. "We were all out of work and extremely depressed about it," says Danziger, age 32. There was no cushy severance package to fall back on, either — just one month of health insurance.

Fortunately, Danziger had what financial planners call an emergency fund — that is, personal savings that can be accessed quickly and easily in the event of a layoff, a medical crisis, or some other unanticipated difficulty. For Danziger it meant she could afford to take her time finding a job she would like.

Even if your own job seems unshakable, you should prepare for tremors.

HOW MUCH DO YOU NEED?
At a minimum, most planners agree, you should have three months of living expenses in a cash account. (To determine what your bare-bones monthly expenses are, click here for a “What You'll Need” worksheet.)
You might think, why bother? After all, you may own a house and have a flush 401(k) plan that you could tap in a pinch. But do you really feel comfortable putting those assets at risk? Let's say your basement is damaged by flooding and you take out a home-equity loan to pay for the clean-up. If real estate values in your area drop and you have to sell your house, if you don't have much equity, you could end up owing the bank more than the house is worth.

"The 401(k) is a false comfort, too," says Denise Topolnicki, author of How to Raise a Family on Less Than Two Incomes (Broadway Books, $13, www.amazon.com). By borrowing from it, you are robbing your future. What's more, if you take out a loan and then lose your job, you'll have to pay back the money in 60 days, she warns. Even if you have a substantial stock portfolio outside a retirement plan, you don't want to be forced to sell when the market is down.

The question, then, isn't whether to stash three months of living expenses in an emergency fund. It's When do I need more than that? Here are the factors to consider:

Job stability. If your job seems secure, you may need no more than three months of living expenses in your fund. But if you work for a start-up or have little seniority, you should have closer to six months' worth of expenses stashed away. Self-employed workers, salespeople, and others who rely on commissions and tips should also save six months of living expenses. Finally, consider how long, on average, it takes to get a new job in your field. In some industries, it could take more than six months to find a comparable position.

Children. If you have children, you should be more cautious, particularly if only one parent works. "If there is just one breadwinner, having up to a year's worth of living expenses in savings is not unreasonable," says New York City financial planner Karen Altfest.

Disability insurance. If your company doesn't offer a disability policy and you don't own an individual one, beef up your savings to six months or more.

Your comfort level. Some of us need a bigger cushion just to keep nightmares at bay. Think carefully about how much cash will make you feel secure.

WHERE DO YOU PUT THE MONEY?
Money-market funds are the best parking spots for cash — they're safe and liquid, and the interest rates are higher than those you get with regular savings accounts. If you invest through a brokerage firm like Fidelity or Schwab, you'll have the added benefit of being able to invest in other funds as well.

For the highest degree of safety, go with a money-market fund that invests in U.S. Treasuries, like Vanguard Treasury Money Market Fund (www.vanguard.com), says Peter Di Teresa, a senior analyst with Morningstar, a mutual-fund and stock-information and stock-rating company. If you are saving more than six months of living expenses, you could diversify your savings and put half in a money-market fund and half in a short-term bond fund, where your return will be greater.

Whichever fund you choose, build it up the foolproof way — through an automatic investment plan. Arrange to have $100 to $500 transferred each month (depending on how quickly you need to build up a stash) from your checking account. That way money goes directly to your fund before you can get your hands on it.

Finally, keep a small amount of cash ($200 or so) at home for small emergencies — when you lose your wallet, a pipe bursts, or you're stuck in traffic and the kids need to order pizza for dinner. But be sure to reserve your emergency money for just that — emergencies.