Explanation
What is an emergency fund?
An emergency fund is money reserved for urgent, unplanned situations such as a job loss, medical bill, essential repair, or family emergency.
The right amount depends on your essential spending, income stability, insurance coverage, and responsibilities. Starting with three months of expenses is practical for many people, while six to twelve months provides a larger cushion.
Formula
How the calculator works
Multiply your essential monthly expenses by the number of months you want your emergency fund to cover.
Emergency fund = Monthly essential expenses × Coverage months
Remaining amount = Emergency fund target − Current emergency savings
Examples
Emergency fund examples
Starter buffer
₹30,000 expenses × 3 months
₹90,000
Standard cushion
₹40,000 expenses × 6 months
₹2,40,000
Extended safety net
₹55,000 expenses × 12 months
₹6,60,000
FAQ
Frequently asked questions
How much should I keep in an emergency fund?
A common starting point is three to six months of essential expenses. Consider a larger fund if your income is irregular, you support dependants, or your job is less predictable.
What expenses should I include?
Include costs you must continue paying during an emergency: rent or home loan payments, groceries, utilities, insurance, transport, healthcare, and minimum debt payments.
Where should I keep my emergency fund?
Keep it somewhere safe, liquid, and easy to access, such as a separate savings account or suitable liquid fund. Avoid tying all of it up in volatile or hard-to-sell investments.
Should I build an emergency fund before investing?
It is generally useful to establish a basic safety buffer first. This can reduce the chance that you need to sell investments or borrow money when an unexpected expense occurs.
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