How much emergency fund should I keep as a salaried employee in India?

Question

Emergency funds are essential for financial security. This question discusses how much to save, how to calculate monthly expenses, and the best places to store emergency funds for quick access without risk.

Answer 1

Every salaried person needs an emergency fund — no exceptions.

Here’s the golden rule:

---

Save at least 3 to 6 months of essential expenses

If your monthly expenses are ₹25,000:

• ✅ Minimum emergency fund: ₹75,000

• ✅ Ideal emergency fund: ₹1.5 lakh

This gives you a safety cushion if:

• You lose your job

• Face a medical emergency

• Have unexpected repairs or bills

---

What counts as “essential expenses”?

Only include:

• Rent or home EMI

• Groceries & utilities

• Loan EMIs

• Insurance premiums

• Basic transport & phone bills

Skip luxury spends, dining out, subscriptions, etc.

---

Where should you keep your emergency fund?

✅ Top 3 safe options:

1. High-interest savings account

   • Instant access

   • 3.5–6% interest

2. Liquid mutual fund

   • Higher returns (~5–7%)

   • Withdrawable in 1–2 days

3. Fixed deposit with sweep-in

   • Higher returns than savings

   • Still accessible in emergencies

⚠️ Don’t keep emergency funds in your main account — you’ll spend it.

---

✅ Pro Tip: Automate it

Set aside a fixed amount every month — even ₹2,000–₹5,000 adds up fast.

---

Summary:

Every salaried person should save 3–6 months of expenses in an emergency fund.
Keep it safe, separate, and liquid — not in risky investments.
Build it monthly — don’t wait for a big one-time amount.