Finance
How much emergency fund do you really need?
3 months, 6 months, or 12 months — the right answer depends on 5 variables.
The default rule
6× monthly expenses, in a liquid instrument.
Adjust up if
- Single income household
- Variable income (freelance, sales)
- Industry with high layoff risk
- Health condition in family
- High monthly fixed costs (EMI, rent)
Adjust down if
- Dual income, both stable
- Strong family safety net
- Health + critical illness insurance
Where to park
- Liquid mutual fund (4–7% post-tax)
- Sweep-in FD (4–6%)
- Avoid savings account (3–3.5% — inflation eats you alive)
Don’t over-fund
Anything beyond 12 months drag your returns. Move surplus into long-term investments.
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