Three rules before you park six months of expenses anywhere
An emergency fund is a bill. Not an investment. Treat it like the first call on your money and the last to be optimised. The three rules below stop the structure from leaking and the bucket from turning into something it is not.
RULE 01
Size the fund by months, not by rupees.
Six months of your real run-rate expenses, not your wishlist. Rent, EMI, groceries, school fees, utilities, insurance premiums, medical buffer. Open the last three months of statements and average the line. The fund grows with the bill, not with the salary.
RULE 02
Vehicle by liquidity, not by yield.
Tier one in savings for same-day. Tier two in sweep FD for overnight. Tier three in a liquid fund for T plus one. The yield comes for free once the access window is set. Reaching for an extra two pct by parking the whole bucket in arbitrage or short-duration funds breaks the bucket the day you need it.
RULE 03
Refill before you compound.
The day you tap the fund, the SIP that month goes into refilling it, not into the equity book. Volatile assets do not belong in the bucket you call when something has already gone wrong. The compounding curve is the second priority. The bill is the first.
The line that pays
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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