Sunday morning chai. Friend asks how big his emergency fund should be. I said six months. He nodded. Then I asked where he keeps it. Savings account. That is the leak.
"Six months of expenses" is the easy half. The hard half is what vehicle holds it. Savings account looks safe. It is also the slowest leak in personal finance. Five pct inflation on a 3 pct yield is a two pct cut to the real value of your bills bucket every single year, and the bucket is sized in months not rupees so the leak compounds the wrong way.
18000Rs
All in savings . one year interest
Rs 6 lakh emergency fund at 3.0 pct savings rate. Same-day liquidity, no return on top. Inflation eats 30000 of purchasing power the same year. Net real position: down 12000.
VS
33500Rs
Three bucket version . one year interest
Same Rs 6 lakh. One month savings, two months sweep FD, three months liquid fund. Same liquidity tiered by tier. Real position: roughly flat after inflation.
Same fund. Same six months. Rs 15500 a year on the floor because the structure was wrong. Over a decade that is roughly Rs 1.8 lakh of forgone interest after compounding. The amount that pays for the emergency you actually had. Card two has the tiered structure. Card three has the rules.