Learn · Emergency fund first
Why an emergency fund comes first
Money for surprises, kept where you can get it fast.
3 min read
Before you invest
A job change, a medical bill or a family need can come without warning. If you have nothing set aside, you may have to sell investments when they're down, or borrow at high interest.
3 to 6 months
Of your monthly expenses is a common target
Lean towards 6 if your income is irregular or others depend on you.
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What that is in rupees
Say you spend ₹25,000 a month. Pick how many months to cover.
- 3 months
- ₹75,000 Enough if your job is steady and nobody depends on you.
- 4 months
- ₹1 lakh A middle ground.
- 6 months
- ₹1.5 lakh Better if your income is irregular or family depends on it.
Your own figure depends on your expenses, not your salary.
Where to keep it
It should be safe and quick to reach, not chasing returns. Common choices are a savings account, a sweep-in FD, or a liquid fund, where money usually reaches your bank the next working day.
Myth
An emergency fund should be invested in equity so it grows.
Fact
Equity can fall 30% or more just when you need the money. This money's job is to be there, not to grow.
Work out your target from your monthly expenses.
Open the calculatorWords from this lesson
- Emergency fund: Money kept aside for surprises: 3 to 6 months of expenses.
- Liquid fund: A debt fund that lends for up to 91 days. Often used to park money you'll need soon.
Next in Emergency fund first: Where to keep your emergency fund