An emergency fund is cash set aside to cover unexpected expenses—like a medical bill, car repair, or sudden job loss. It is the foundation of any solid financial plan.
How Much Do You Need?
The general rule of thumb is to save 3 to 6 months of living expenses. Note that this is expenses, not income. If you earn $5,000 a month but only spend $3,000 on necessities (rent, food, utilities), your target for a 3-month fund is $9,000.
Where to Keep It
Your emergency fund must be highly liquid. Do not put it in the stock market or real estate. A high-yield savings account or a short-term Fixed Deposit is ideal.
If you choose to use an FD for a portion of your emergency fund, you can calculate your exact interest earnings using our Fixed Deposit Calculator.