Excellent — let’s plan this like a top-tier financial planner would.
🧮 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.
🏦 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.
2️⃣ Near-Term Access (40% = ₹72,000)
Purpose: For use within a few days.
Where:
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Liquid Mutual Fund (e.g., Parag Parikh Liquid Fund, ICICI Prudential Liquid Fund, Nippon Liquid Fund)
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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)
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)
⚖️ Step 3: Review and Maintain
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Rebalance once a year.
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Top up when your monthly expenses rise.
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Never use this fund for investments, vacations, or gadgets — only true emergencies.
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Keep part in your spouse’s/joint account for access if you’re unavailable.
📈 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.
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.
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