An emergency fund is money set aside for the unexpected — a job loss, a medical bill not covered by insurance, or an urgent repair. It is the buffer that stops a bad month from becoming a financial crisis.
How big should it be?
- Salaried, stable job: about 6 months of essential expenses.
- Self-employed or variable income: 9–12 months.
- Single-income family with dependants: lean towards the higher end.
Essential expenses include rent or EMIs, groceries, utilities, insurance premiums and school fees — not holidays or discretionary shopping.
Where to keep it
Your emergency fund needs safety and quick access more than returns. A practical split is one month in your savings account, and the rest in liquid funds or sweep-in FDs, which typically allow redemption within a working day.
Build it first
Before starting long-term SIPs, build at least three months of your emergency fund. Then complete it alongside your other goals.
This article is for educational purposes only and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.
