Why it comes first
An emergency fund is money set aside for the unexpected — a job loss, a medical bill, an urgent repair. It stops you from selling investments at a bad time or falling into high-interest debt, so it’s the foundation of any plan, before you start investing for growth.
How much do you need?
A common guideline is 3–6 months of essential expenses (rent, EMIs, groceries, bills). If your income is irregular or you have dependents, lean toward the higher end.
Where to keep it
Keep it safe and liquid — a mix of a savings account and a liquid fund works well. Avoid locking it in equity or long tenures; the point is quick, penalty-free access, not high returns.
How to build it
Start a small monthly SIP or auto-transfer into a liquid fund until you reach your target, then shift focus to goal-based investing. Replenish it whenever you dip in.
Frequently asked questions
How much should an emergency fund be?
Typically 3–6 months of essential expenses. Keep more if your income is irregular or you have dependents.
Where should I keep my emergency fund?
Somewhere safe and liquid — a mix of a savings account and a liquid fund — so you can access it quickly without penalty. Avoid equity for this money.
Should I invest before building an emergency fund?
Build the emergency fund (and get basic insurance) first. It prevents you from selling investments at the wrong time or taking on costly debt in a crisis.