The emergency fund and why we need it

Have you ever been caught licking the dregs of the money jar when an accident happens or when something that needs your financial resources calls your attention NOW? Or have you been living from paycheck to paycheck, then suddenly your car breaks down?
What do you do? Apply for a loan? Get into debt?

I hope that I will never be put in this situation and to make sure I never will, I am currently in the process of pooling my own emergency fund.
In simple terms, an emergency fund is "the most valuable thing you can have because it protects you from the unforeseen things that can demolish all of your financial planning and throw you into debt." (The Simple Dollar)

Why?
The obvious reason would be so that big and sudden financial obligations do not catch you unawares. here are also some reasons why creating an emergency fund is critical: (from 21 strategies for creating an emergency fund and why its critical (@ zenhabits.net)

1. Stop getting into debt. You won't have to resort to borrowing money (and worry how to repay it!) every time there is an emergency expense.
   
2. Smooth out your budget. You won't have to readjust your budget every time an unexpected expense comes up.
   
3. Prevent late fees. When an unexpected increase in a bill arrives, you won't have to skip out on the payment of the increase just because your current budget can't handle it.
   

Important things to consider when setting up an emergency fund

• How much do you put in an emergency fund - you to have decide on amount you think will cover for you in sudden cases of financial need. The common suggestion in cyberspace is 3 to 6 months worth of your current salary. It might be daunting to save and set aside this much money, thats why the emergency fund is always a work in progress that requires discipline (to strictly follow your set budget guidelines to achieve your desired emergency fund level) and a belief in caution (that it is the right thing to do, to set aside money that will help you in unexpected events)
  
• Define what is an emergency for you - is it when your budget has been stretched too thin that it cant handle the extra expense? or will you define "emergency" as specific situations like accidents, car trouble, hospitalization, etc.?
  
• Where do you place your emergency fund - I would suggest to deposit the money in an account where your funds can be accessed easily, a savings account with an ATM and/or high interest per annum (due to the fact that you will leave the fund untouched until an emergency comes up)
• How to replace the money you take from the emergency fund - Be ready to flex some items in your budget to accommodate the replenishing of your emergency fund, or you can wait for bonuses/ big chunks of income to replace the money (just make sure you won't have to wait for too long)

Hope this helps! Comments will be appreciated, thanks! :)