How much to keep
An emergency fund pays for essentials when income stops or a big bill arrives: a job loss, a medical emergency not fully covered by insurance, an urgent home or car repair. Size it in months of essential spending, not of income:
- 3 months with a steady salary and no one depending on you.
- 6 months with variable pay or contract work, or a steady salary that supports a family.
- 9 to 12 months for business owners and freelancers, whose income can stop without notice.
Essentials are what you'd still pay with no income: rent or EMIs, groceries, bills, insurance premiums and school fees.
Where to keep it
Somewhere safe that you can reach within a day or two, even if it earns less: a savings account, a sweep-in or short fixed deposit (see the FD calculator), or a liquid fund. Not shares or equity funds, which can be down just when you need the money. Health insurance comes first: it keeps one hospital bill from emptying the fund.
Building it
Set a fixed amount aside on salary day until the fund is full, then point the same amount at your goals with a SIP. The 50/30/20 budget helps find the money. Top the fund up after you use it, and review it when your rent, EMIs or family change.
Results are estimates for illustration only, not financial advice. Banks and schemes may round, apply TDS or use slightly different day counts — confirm figures with your bank or employer. Written by the Welthr team; last reviewed on .