An emergency fund is not an investment, and that is the point

Every financial plan that failed in the households we have written about failed the same way: something went wrong, there was no cash, and long-term investments were sold at the worst possible moment.

How much

Six months of essential expenses if you are salaried with a stable job and no dependants; nine to twelve if your income is variable, you are self-employed, or you are the only earner. Count essentials — rent, EMIs, groceries, school fees, insurance premiums — not your current spending.

Where to keep it

Split it. One month in the savings account for instant access. Two to three months in a sweep-in fixed deposit that breaks without penalty. The rest in a liquid or overnight fund, which redeems in a day and typically yields a little more.

What it must not be

Not equity — the moment you need it is precisely the moment markets are likely to be down. Not a credit card limit — that is debt, not savings. Not your PPF, which you cannot touch for years.

The return you are buying

An emergency fund earns 3–7%. That looks like a poor use of capital until the month you need it, when it earns you the right not to sell your equity portfolio at a 30% discount or borrow at 36% on a card. Priced that way, it is the best return in the portfolio.

Rebuild it deliberately

After you use it, refill it before resuming any increase in investing. Treat the refill as a fixed expense for as many months as it takes.

Then, and only then

Once the fund is in place and your insurance is sorted, everything else on this site becomes useful — SIPs, tax planning, retirement corpus arithmetic. Before that, they are theory.