# Emergency Fund . Six Months Rule + Vehicle Stack

_Systematic Investing . 2026-05-19 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

Sunday chai with a friend. He asks how big his emergency fund should be. I said six months of expenses. He nodded. Then I asked where he keeps it. Savings account.

That is the leak.

The size rule is the easy half. Most people get to six months on their own. The vehicle is what nobody explains, and it is where the structure of the bucket either compounds quietly or bleeds quietly. Six months in a savings account at 3 pct nominal loses to 5 pct inflation every year. The fund looks safe. The purchasing power of the rupees inside it is being shaved.

Run it on Rs 6 lakh, which is roughly six months for an urban household with Rs 1 lakh monthly run-rate. Whole bucket in savings at 3 pct earns Rs 18000 in a year. Split the same Rs 6 lakh across three tiers and the bucket earns Rs 33500 in the same year on the same corpus. Tier one is one month of expenses in a regular savings account for same-day access at 3 pct. Tier two is two months in a sweep FD or flexi deposit at 5.5 pct, which auto-breaks into the savings account on debit. Tier three is three months in a liquid fund at 6.5 pct, redeemable on T plus one. The blended yield is 5.58 pct on the same bucket. Same liquidity in aggregate. No tier slower than the job it has to do.

The gap is Rs 15500 a year on the floor. Over a decade compounded at roughly 6 pct it grows to about Rs 1.8 lakh. The amount that often pays for the emergency you actually had.

Three rules keep the bucket honest. Size it by months of real expenses, not by a target rupee number, and average the last three months of statements rather than the wishlist. Pick the vehicle by liquidity window first and let the yield come for free, because reaching for an extra two pct by parking the whole bucket in arbitrage or short-duration funds breaks the bucket the day you call it. And refill before you compound. The month you tap the fund, the SIP goes into rebuilding it before the equity book gets another rupee.

An emergency fund is the first call on your money and the last to be optimised. Not optimising the vehicle still costs you a year of salary worth of forgone interest over a decade. Both halves of the rule earn their keep.

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