Emergency fund: Earn ₹1 lakh a month? Here’s how much you should save for 6, 9 or 12 months, experts explain

An emergency fund should cover six, nine or 12 months of essential expenses, depending on job security, family responsibilities and income stability. Home loan EMIs, insurance premiums and school fees should be factored into the savings target.

An emergency fund should be based on essential household expenses and how long it could take to replace lost income, rather than salary alone. While six months of expenses may be sufficient for some households, sole earners, people supporting dependent parents and professionals with variable incomes may need a larger financial cushion.

Sandeep Jethwani, co-founder of Dezerv, recommends that dual-income salaried households with stable jobs and adequate health insurance maintain at least six months of expenses as an emergency fund. Sole earners, people supporting parents and employees in sectors facing layoffs should consider nine months, while business owners, freelancers and professionals with variable incomes may need to set aside enough for 12 months.

How much emergency fund do you need?

The first step is to calculate essential monthly household expenses rather than use your salary as the benchmark. Include rent or home loan EMIs, groceries, utilities, school fees, insurance premiums, domestic help and financial support to parents.

Jethwani recommends choosing the size of the fund based on how long it could take to replace your income if it stopped suddenly. Job security, the number of earning members in the household and the time required to find another job should all influence the target.

Seniority also matters. A senior professional may earn more but face a longer hiring process because fewer positions are available at that level. A higher salary, therefore, does not necessarily mean a smaller emergency fund is sufficient.

Should you include EMIs, insurance premiums and SIPs?

Essential financial commitments should be part of the calculation because they cannot always be postponed during an income disruption.

Missing a home loan EMI can affect your credit record, while a lapsed health or term insurance policy can leave a family without important financial protection. School fees and annual insurance premiums also need attention because they may fall due in large instalments rather than evenly throughout the year.