Introduction
Before chasing high returns, the first step in financial planning is protecting yourself from surprises — job loss, medical emergencies, or sudden expenses. That’s where an emergency fund plays a key role.
1. What Is an Emergency Fund?
It’s a separate amount kept aside to cover your essential expenses in case of unexpected events — without touching your investments or taking loans.
2. How Much Should You Save?
A good rule:
- Salaried individuals: 3–6 months of monthly expenses
- Self-employed/business owners: 6–12 months of expenses
For example, if your monthly cost of living is ₹50,000, aim for ₹1.5 to ₹3 lakhs in a liquid or ultra-short-term fund.
3. Where to Keep It?
Avoid locking this money in FDs or equity funds. Use:
- High-interest savings accounts
- Liquid mutual funds
- Sweep-in FDs for moderate returns + liquidity
4. Common Mistakes
- Mixing emergency fund with regular savings
- Investing it for returns instead of access
- Ignoring inflation — review the amount every year
Conclusion
An emergency fund is like a financial seatbelt. You hope you never need it, but it protects your entire financial journey when bumps come.
Hello! 👋 I’m Shivam Pathak, and I’m thrilled to connect with you as a Certified Financial Planner.
Thank you so much for being a part of our recent financial awareness seminar. Your presence and eagerness to secure a better financial future mean a lot to us.
To offer more tailored support, we’re thrilled to present you with a free one-on-one financial clarity session.
💬 This isn’t about selling—it’s about giving you:
– Clear answers to your questions about mutual funds, savings, tax planning, or other investment opportunities
– Insights on how to match your finances with your personal aspirations
By the way, I wrote an article for Moneycontrol that draws parallels between Virat Kohli’s Test career and creating long-term success in personal finance. Feel free to have a read!