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Emergency fund
Money you hope to never touch, kept where you can reach it by tomorrow.
A job gap, a hospital deposit, a roof that leaks in the monsoon. An emergency fund pays for these without breaking your SIPs or selling equity in a bad month. We help you size it, park it and fill it with a monthly SIP.
- 3 to 12 months of essential spends
- 1 business day to get money from a liquid fund
- Step one of every plan we write
How many months
Six months is a starting point, not a rule
The right number depends on how steady your income is and how many people lean on it. Count essential spends only: the bills that still arrive if your salary stops.
| Your situation | Months to keep | Why |
|---|---|---|
| Salaried, single, no dependants | 3 to 4 | Lower fixed costs, quicker to find the next job |
| Salaried, both partners earning | 4 to 6 | One income can carry the house for a while |
| Salaried, single earner with family | 6 to 9 | Children's fees, parents' medicines and rent all sit on one salary |
| Self-employed, freelancer, commission income | 9 to 12 | Income already swings month to month |
| Business owner | 12, kept apart from business cash | A slow quarter at work should not empty the household account |
Quick sizing
Your emergency fund target
₹2,70,000
Keep about ₹45,000 in your savings account and the rest, ₹2,25,000, in a liquid fund.
What to count
Essentials in, wishes out
Pull up three months of bank statements and add only what you would still pay in a lean month. For most households this comes to 50 to 70% of take-home pay.
- Rent or housing society dues
- Groceries, milk, cooking gas, electricity, water
- School and tuition fees
- Insurance premiums, so cover never lapses
- Medicines and regular doctor visits
- Phone, internet, fuel and commute
- Your running SIPs, if you want them to continue
Leave these out
- Weekend dining and food delivery
- Holidays and festival shopping
- Gadget and furniture upgrades
- Streaming and club subscriptions you would pause
An emergency fund does not replace health insurance. One hospital stay can cost more than six months of expenses. Get a family floater first, then build the fund. See health insurance.
Where to keep it
Three layers, from instant to next-day
The goal is safety and quick access, not high returns. Splitting the fund lets the larger part earn a little more than a savings account while staying a day away.
-
Layer 1: savings account
About one month of spends. Available by UPI or card the same minute, for a midnight hospital admission or an urgent repair.
Same minute
-
Layer 2: sweep-in or short bank FD
One to two months. A sweep-in FD moves money back to your savings account when the balance runs short. Breaking early may cost a small interest penalty.
Same day
-
Layer 3: liquid or overnight fund
The rest. Redemption money usually reaches your bank the next business day. Many funds also allow instant redemption of up to ₹50,000 or 90% of your holding, whichever is lower. More on liquid funds.
Next business day
Liquid funds are not deposits. Their value can dip slightly on rare days. Gains are taxed at your income slab rate. Rules as of 2026, check current rules. Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Not for your emergency fund
Building it with a SIP
Fill it month by month, not in one go
Few people have ₹2.7 lakh lying around. A monthly SIP into a liquid fund, set for the day after salary credit, builds the fund without you having to remember.
- Fill layer 1 first. Park one month of spends in your savings account from your next salary.
- Start a liquid fund SIP. Pick an amount you will not stop: ₹5,000, ₹10,000 or ₹15,000.
- Add windfalls. Bonus, tax refund or gift money goes in as a lumpsum until the target is met.
- Then switch. Once full, move the same SIP to your long-term equity goal. See how an STP or a regular SIP fits next.
| Monthly SIP | Months to target | You put in | Estimated value |
|---|---|---|---|
| ₹5,000 | 48 | ₹2,40,000 | ₹2,73,651 |
| ₹10,000 | 26 | ₹2,60,000 | ₹2,79,305 |
| ₹15,000 | 18 | ₹2,70,000 | ₹2,83,907 |
| ₹20,000 | 14 | ₹2,80,000 | ₹2,91,306 |
6.5% a year is an assumed rate for illustration, compounded monthly, before tax. Real liquid fund returns move with interest rates and are not fixed. Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future.
Keeping it working
Five habits that keep the fund honest
Keep it in a separate folio
Not the same fund you use for goals. Out of sight means you are less tempted to spend it on a sale.
Name a nominee
Your spouse or a parent should be able to claim it without a long paperwork trail.
Raise it every year
Expenses grow with inflation and with family. Recheck the target at your annual review.
Refill after you use it
Used ₹60,000 for a repair? Restart the SIP until the balance is back where it was.
Tell one person where it is
A short note with the fund category, folio and bank details, kept with your insurance papers.
Plan my emergency fund
Tell us your monthly spends. We send back a plan.
Target amount, how to split it across the three layers, and a SIP amount that fits your salary. On WhatsApp, at no charge.
Should I build the emergency fund before starting an equity SIP?
Ideally yes, or at least alongside. If cash is tight, put most of your monthly saving into the emergency fund for the first year and run a small equity SIP of ₹500 to ₹1,000 so the habit starts. Once the fund is full, shift the bigger amount to equity.
Is a fixed deposit good enough on its own?
It works, and many families are comfortable with it. The trade-off: breaking an FD early may carry a penalty, and interest is taxed every year at your slab rate. A mix of savings account, sweep-in FD and a liquid fund gives quicker access to most of the money.
Can I use a credit card instead of an emergency fund?
For a few days, as a bridge, yes. But card dues not paid in full attract interest of 30% a year or more. The fund should be what pays the card bill.
How is a liquid fund taxed?
Gains are added to your income and taxed at your slab rate, whenever you redeem. There is no long-term benefit for holding longer. Rules as of 2026, check current rules.
Does my emergency fund count towards my retirement or child goals?
No. Keep it separate. If it is mixed into a goal, you will either hesitate to use it in an emergency or dip into a goal that cannot be rebuilt later.
Read next
Related services and guides
An emergency fund sits next to insurance in the base layer of a plan. These pages cover the rest.
Liquid funds
Where the bulk of the fund usually sits
Health insurance
So one hospital bill does not empty the fund
Term insurance
Covers the family if the income stops for good
SIP
What to do once the fund is full
Blog: emergency fund in plain words
A shorter read to share with family
Financial planning
The full written plan, with this as step one