Creating an Emergency Fund for a Rainy Day

Life is unpredictable. Your phone might fall in water, your car might break down, or even worse you may lose your job. In moments like these, having an emergency fund is incredibly valuable since it serves as your financial safety net.

Let’s learn how to build one.

What is an Emergency Fund?

An emergency fund is a dedicated pool of money set aside to deal with unexpected expenses such as:

• Medical emergencies
• Job loss
• Urgent home repairs
• Emergency travel
• Car breakdowns

How Much Should You Save?

A good rule of thumb is to save 3 to 6 months of essential expenses. If your monthly spend is ₹40,000, aim for ₹1.2–2.4 lakhs. Self-employed or supporting dependents? Lean towards the higher end. Also, don’t forget: health insurance is essential to prevent medical emergencies from draining your fund.

Where Should You Keep It?

Your fund should be:

• Liquid – Easy to access immediately
• Safe – Not subject to market fluctuations
• Separate – Not mixed with regular spending money

Options: high-interest savings accounts, liquid mutual funds, sweep-in FDs. Avoid tax-saving FDs or equity investments.

How to Build One

1. Start Small: Even ₹500 a week counts.
2. Automate It: Set a recurring transfer after payday.
3. Cut Tiny Leaks: Cancel what you don’t use.
4. Don’t Touch It: Define rules for real emergencies.

Why It Matters

An emergency fund gives you freedom, peace of mind, and resilience. You can’t predict the storm, but you can be prepared for it.

You can’t control the rain. But you can carry an umbrella.