Emergency Fund Planning

 Excellent — let’s plan this like a top-tier financial planner would.

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🧮 Step 1: Determine Ideal Emergency Fund Size

Your monthly expense = ₹30,000.
Emergency fund is meant to cover living expenses when income stops (job loss, illness, etc.).

Recommended range:

Risk Level	Duration	Fund Amount
Minimal dependents, stable job	3 months	₹90,000
Moderate dependents, average job stability	6 months	₹1,80,000
High dependents / uncertain income / self-employed	9–12 months	₹2,70,000 – ₹3,60,000

✅ Ideal for most people: 6 months = ₹1.8 lakh.
If you have dependents or irregular income, build toward ₹3 lakh.

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🏦 Step 2: Where to Keep Your Emergency Fund

The key principles:

• 100% Liquidity (instant access)

• Capital protection

• Reasonable return (better than savings a/c)

We split it across 3 buckets for safety + liquidity:

1️⃣ Instant Access (30% = ₹54,000)

Purpose: For true emergencies — medical, job loss, etc.
Where:

• High-interest Savings Account (like IDFC FIRST, AU Small Finance, or Airtel Payments Bank)

• Sweep-in FD with your main bank (instant withdrawal but earns FD interest)

Expected return: 5–7% p.a.

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2️⃣ Near-Term Access (40% = ₹72,000)

Purpose: For use within a few days.
Where:

• Liquid Mutual Fund (e.g., Parag Parikh Liquid Fund, ICICI Prudential Liquid Fund, Nippon Liquid Fund)

• Or Ultra Short-Term Debt Fund (for slightly higher yield, 7–7.5%)

Access time: 1 business day withdrawal
Tax: Gains taxed as per income slab (short-term capital gains)

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3️⃣ Short-Term Growth (30% = ₹54,000)

Purpose: To beat inflation, yet accessible within a week.
Where:

• Arbitrage Fund (low risk, equity-like taxation if held >1 year)
  Examples: Kotak Equity Arbitrage Fund, Nippon Arbitrage Fund

• Or Short-Term FD (6–12 months) with a stable bank

Return: 7–8% (Arbitrage) or ~7.5% (FD)

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⚖️ Step 3: Review and Maintain

• Rebalance once a year.

• Top up when your monthly expenses rise.

• Never use this fund for investments, vacations, or gadgets — only true emergencies.

• Keep part in your spouse’s/joint account for access if you’re unavailable.

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📈 Example Structure (₹1.8 lakh total)

Category	Amount	Product	Expected Return
Instant access	₹54,000	High-interest savings a/c	6%
Near-term	₹72,000	Liquid mutual fund	7%
Short-term	₹54,000	Arbitrage fund or FD	7.5%

Annual blended return ≈ 6.8–7%, safely beating inflation.

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Would you like me to tailor this plan to your specific job type and dependents (e.g., salaried, self-employed, single, or with family)? That will refine how many months of expenses you truly need.