An emergency fund is money set aside for a shock, such as a job loss, a medical bill or an urgent repair. The usual advice gives a range, but the useful number is the one built from your own spending.
A rule of thumb
Many people aim for three to six months of essential expenses. A single earner, someone with irregular income or someone with dependants often aims higher. Treat the range as a starting point, not a promise.
Step 1: Find your essential spending
Essentials are the costs you cannot stop quickly: rent or home loan, utilities, groceries, insurance, transport to work, school fees and loan EMIs. Go through three recent months and total only those categories.
Step 2: Average it
Add the three monthly totals and divide by three. That is your monthly essential spending. The Monthly category trend report in the Report library shows each category month by month, which makes this quick.
Step 3: Multiply
If your essentials are ₹45,000 a month, three months is ₹1,35,000 and six months is ₹2,70,000. Pick a target inside the range that fits your situation.
Where to keep it
- Somewhere you can reach quickly, such as a savings account or a liquid fund, as you prefer.
- Separate from daily spending, so it is not eaten by accident.
- Not in anything whose value can fall sharply just when you need it.
Build it gradually
Set a fixed monthly amount and track progress with your savings rate. Even a modest amount, moved on salary day, adds up. The Savings rate by month report shows whether you are actually setting money aside.
See what your spending means.
Turn individual purchases into useful groups, from food and travel to bills and business costs.
