How to Build an Emergency Fund (Without Stressing About It)?

How to Build an Emergency Fund (Without Stressing About It)?

Last published/edited on 2025-05-13

Let’s face it — adulting is hard. From surprise medical bills to job loss or car repairs, life throws curveballs when we least expect them. That’s where your emergency fund steps in like a financial superhero. But what exactly is an emergency fund? How much should you save? And where do you even begin? Let’s break it down in simple, non-jargony terms.

What Is an Emergency Fund?

An emergency fund is money you set aside specifically for unexpected expenses, things that aren’t part of your monthly budget.

Think:

  • Medical emergencies not covered by insurance.
  • Sudden home or car repairs.
  • Job loss or pay cuts.
  • Emergency travel (especially for family).

It’s not for:

  • Upgrading your iPhone.
  • Weekend getaways.
  • Online shopping “accidents”.

Why Do You Need One?

According to a TOI, 75% of Indian households don’t have enough savings to survive beyond 3 months without income. That’s scary. But it’s also fixable. Having just ₹50,000 to ₹1 lakh set aside can help you avoid:

  • Taking high-interest loans
  • Liquidating long-term investments (like your ELSS or SIPs).
  • Stressing about money when you should be healing or recovering.

How Much Should You Save?

  • The golden rule = 3 to 6 months' worth of expenses. Example: Monthly expenses (rent + groceries + bills) = ₹30,000
    • Emergency fund goal = ₹90,000 to ₹1,80,000 If you’re a freelancer or have variable income, aim for 6–9 months instead.

How to Start Building an Emergency Fund — Step-by-Step

Step 1: Set a Mini Target
  • Start with just ₹10,000. It’s doable and gives you quick momentum.
Step 2: Open a Separate Savings Account, Preferably with:
  • Zero balance requirement.
  • Good mobile access.
  • Higher interest (like SBI Digital Savings, Airtel Payments Bank, etc.).
  • Don't mix it with your spending account.
Step 3: Automate a Fixed Monthly Transfer
  • Even ₹2,000/month builds ₹24,000 in a year — and that’s tax-free interest!
  • Step 4: Use Bonuses or Freelance Gigs
  • Got a Diwali bonus? A side hustle payout? Redirect part of it to your emergency fund before you splurge.
Step 5: Keep It Liquid, But Not Too Handy.

Use:

  • High-interest savings accounts.
  • Liquid mutual funds (low risk, fast redemption).
  • Recurring deposits with easy break clauses.

Avoid:

  • Fixed deposits with heavy penalties.
  • Equity or crypto (too volatile).

Must DO’s:

  • Review it annually. If your expenses grow, so should your fund.
  • Don’t stop your SIPs to build this — instead, balance both.

An emergency fund isn’t just about money — it’s about peace of mind. It lets you face life’s surprises without panic, without debt, and without guilt. Start small. Stay consistent. You’ll thank yourself later.



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