Calculate Your Target Fund Size
See 'Calculating Expenses' section below for help.
Consider job security, income predictability, and dependents.
This is a guideline. Adjust based on your specific needs (dependents, health etc.).
What is an Emergency Fund?
An emergency fund is money set aside specifically to cover unexpected financial emergencies, such as job loss, medical bills, or urgent home repairs. It acts as a crucial safety net, preventing you from derailing your long-term financial goals or going into debt when unexpected costs arise.
Typically, it's recommended to save 3 to 12 months' worth of essential living expenses, depending on your personal circumstances and income stability.
Calculating Your Monthly Expenses
To use the calculator accurately, estimate your average monthly spending on necessities. Focus only on expenses you absolutely cannot avoid, even during an emergency. Exclude discretionary spending like entertainment or dining out.
Common essential expenses include:
- Rent or Mortgage Payments
- Utilities (Electricity, Water, Gas, Internet)
- Groceries and Household Supplies
- Transportation Costs
- Insurance Premiums
- Minimum Debt Payments
- Childcare or Dependent Care Costs
- Essential Medical Expenses
Review your bank and credit card statements for the last 3-6 months to get an accurate average.
Where to Keep Your Fund
The primary goals are safety and liquidity (easy access). It should not be exposed to market fluctuations.
High-Yield Savings
Offers slightly better interest than regular savings accounts while remaining very safe and accessible. Look for accounts with no lock-in period.
Liquid Mutual Funds
Generally offer higher potential returns than savings accounts with high liquidity. They carry very low risk but are not entirely risk-free like bank deposits.
Short-Term Fixed Deposits
Offers guaranteed returns and safety. Choose shorter tenures (3-6 months) or FDs with no penalty on premature withdrawal to maintain accessibility.
It's often wise to split the fund across 1-2 accessible options.
Tips for Building Your Fund
Saving several months' worth of expenses takes time. Here are some strategies:
Start Small
Aim to save your first ₹10,000 or one month's expenses first. Celebrate small wins!
Automate Savings
Set up an automatic transfer from your salary account right after payday. Treat it like any other bill.
Cut Expenses
Temporarily reduce discretionary spending and redirect that money to your emergency fund.
Use Windfalls
Allocate a portion of any unexpected income (bonuses, tax refunds, gifts) directly to your fund.
Replenish After Use
If you have to dip into your emergency fund, make it a priority to build it back up as soon as possible.
Frequently Asked Questions
Generally, it's for essential, unexpected expenses like job loss, major medical bills not covered by insurance, urgent home repairs (like a burst pipe), or essential car repairs needed for commuting.
No. The primary goal is safety and quick accessibility, not high returns. Investing involves risk, and you might need the money when the market is down, forcing you to sell at a loss. Keep it in safe, liquid options.
It's wise to review it annually or whenever you have a significant life change (new job, change in income, marriage, child, major move) as your expenses or risk profile might change.
Financial advisors often recommend building a small starter emergency fund first (e.g., ₹50,000 or 1 month's expenses) before aggressively tackling high-interest debt. Once high-interest debt is clear, focus on building the full 3-12 month fund.
No. Your emergency fund is strictly for unexpected needs. Regular savings are typically for planned future wants or goals, like a down payment, vacation, or car purchase. Keep them separate, ideally in different accounts.
This calculator provides estimated figures for informational purposes only. Actual requirements may vary due to personal circumstances. This is not financial advice. Consult with a financial advisor before making investment decisions.