An emergency fund is money you keep readily accessible for unexpected expenses — job loss, medical emergency, urgent home repair. It is not an investment. It is financial insurance.
How much do you need?
The standard rule: 3–6 months of monthly expenses (not salary). If your monthly expenses are ₹30,000, your emergency fund should be ₹90,000–₹1,80,000.
| Monthly Expenses | 3-Month Fund | 6-Month Fund |
|---|---|---|
| ₹20,000 | ₹60,000 | ₹1,20,000 |
| ₹30,000 | ₹90,000 | ₹1,80,000 |
| ₹50,000 | ₹1,50,000 | ₹3,00,000 |
Where to keep your emergency fund
- High-yield savings account (like IDFC First, AU Small Finance Bank — 6–7% interest)
- Liquid mutual fund (slightly better returns, redeemable in 1 day)
- NOT: FD with lock-in, NOT: equity investments, NOT: your regular salary account
Once your emergency fund is ready, start investing. Read: how much to invest based on salary. Also consider: term insurance as the next step in your financial safety net.