Why an emergency fund is essential When the pandemic hit in 2020, millions across India found themselves without work, income, or a backup plan. That crisis taught a crucial lesson—your financial stability can change overnight. An emergency fund gives you breathing room when life takes an unexpected turn. Be it job loss, health issues, or home repairs, having cash on hand means you won’t need to borrow at high interest or sell your long-term investments.
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Start with what you have—not what you wish you had Too many people delay saving because they believe they need ₹50,000 or more to begin. That’s simply not true. If you can spare ₹1,000 a month, start with that. The key is to treat it like a non-negotiable bill. Automate it. Put it into a separate savings account or a liquid fund. Small, steady steps work better than waiting for a big windfall that may never come.
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Trim smartly, not harshly You don’t need to cancel all joy from your life to save. Instead of cutting everything, cut mindfully. Maybe it’s switching to home-brewed coffee instead of expensive takeaways. Maybe it’s postponing a gadget upgrade. You can still go out, stream your favourite shows, or take holidays—just not all at once. The trick is identifying expenses that don’t give you lasting value and redirecting that money into your emergency fund.
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Keep it accessible, but not too visible Your emergency fund shouldn’t live in your main savings account. That makes it too tempting to touch. At the same time, it shouldn’t be locked away in a five-year FD. Choose a place that offers quick access—like a high-interest digital savings account or a low-risk liquid fund. This way, you can access your money in hours if needed, but you won’t be tempted to spend it casually.
Stay flexible with your pace Some months, you’ll save more. Other times, you may have to skip saving entirely. That’s okay. What matters is coming back to it. The beauty of an emergency fund is that it doesn't need perfection—just consistency over time. Don’t punish yourself if you dip into it for a genuine need. That’s what it’s for. Just resume as soon as you can and keep the habit alive.
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Update it as your life evolves What worked when you were single might not be enough when you have children or ageing parents to care for. Your emergency fund isn’t a set-it-and-forget-it deal. Review it every year. If your monthly expenses go up, adjust the target. The goal is to keep it relevant to your life stage. It’s not just about saving money—it’s about building security that evolves with you.
