An Emergency Fund is a pool of money set aside specifically to cover urgent, unexpected expenses. It is not for buying a new phone or a vacation. It is for true emergencies like:
- Job Loss
- Medical Emergency
- Urgent Home/Car Repair
How much do you need?
The general rule of thumb is 6 to 12 months of your living expenses.
Formula:
Emergency Fund = Monthly Expenses × 6
- Stable Job (Govt/MNC): 3-6 months might be enough.
- Volatile Job (Startup/Freelance): 6-12 months is recommended.
Where to keep it?
An emergency fund must be Accessible (you can withdraw anytime) and Safe. Do not look for high returns here.
| Option | Liquidity | Safety | Approx. Returns* |
|---|---|---|---|
| Savings Account | Instant | Highest | Low (2.5 - 3%) |
| Fixed Deposit | 1 Day | High | Medium (6 - 7%) |
| Liquid Mutual Funds | 1 Day | High | Medium (6 - 7%) |
| Stock Market | High | Low | volatile |
*Note: Return rates are indicative and subject to market conditions.
Common Mistake
Many people invest their emergency money in the stock market to get "better returns". This is dangerous. If the market crashes when you lose your job (which often happens together during a recession), you will be forced to sell at a loss.
Calculate Your Fund
Use our free calculator to find out exactly how much you need based on your expenses.
⚠️ Educational Use Only
Not Investment Advice: The information presented here is for educational purposes only. We are not SEBI-registered investment advisors.