Life doesn’t always go as planned. Medical bills, job loss, or sudden repairs can knock you off balance financially. That’s where an emergency fund comes in. But how much is enough, and where should you keep it?
Why an Emergency Fund Matters
Without savings, you’ll rely on credit cards or loans during crises—leading to debt spirals. An emergency fund gives peace of mind and financial stability.
How Much to Save
- Minimum: 3 months of living expenses (basic needs like rent, food, transport).
- Ideal: 6 months of expenses for stronger security.
- High-risk jobs/freelancers: 9–12 months is safer.
Example: If your monthly cost of living is ₹40,000, you should aim for ₹1,20,000–₹2,40,000 in your fund.
Where to Keep It
- Savings account: Easy access, but low returns.
- Liquid mutual funds: Slightly higher returns, still accessible.
- Fixed deposit with break option: Safe, but may take a day or two to withdraw.
Never keep your emergency fund in stocks or crypto—it’s too risky.
How to Build One
- Start small: Save ₹500–₹1,000 weekly.
- Automate transfers.
- Use windfalls (bonuses, tax refunds) to boost savings.
Conclusion:
An emergency fund isn’t about making money—it’s about protecting money. Think of it as insurance against life’s surprises. Build it today, and future you will thank you.