How to save Emergency fund

[destello]

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

 

[shrewdoc]

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

Keep your investments on snooze till you save the amount for your emergency fund.

You can't do everything at once for 32k/month income. Moreover, having Emergency Fund is an investment in itself.

 

[Skylar]

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

To enhance your savings, it is essential to reduce expenses and focus solely on saving.
Spend only when necessary.

Activate the “Active Money” option on your Kotak account and deposit the amount into it.
When the “Active Money” feature is enabled, any funds exceeding ₹25,000 in your Kotak account will be automatically swept into a Fixed Deposit (FD).

You will earn an interest rate of 3.5% if the amount is held for 180 days. If you extend the period by another 180 days, the overall interest rate will be 7% annually. The advantage is that you can withdraw the money at any time.

However, if you withdraw before the specified period, you will receive a regular interest rate.

 

[zacobite]

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

Set up PSU BANK account.. dont activate atm or net banking. - Move 3 -5 K to this account on SALARY DAY... and dont touch it.

 

[TaxWiser]

Set up PSU BANK account.. dont activate atm or net banking. - Move 3 -5 K to this account on SALARY DAY... and dont touch it.

Plus make sure to make atleast 1 transaction in every 6 months or else your account get freezed means you can deposit as long as want but when you try to withdraw then first you have to visit branch and do KYC.
Everyone Knows how irritating the offline experience is in most PSUs, unless you have special relation with bank officials Or your branch is an exception

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

My Recommendation will be:

• Get a Virtual Debit Card before closing Physical Debit Card to avoid above mentioned inconvenience Or Use your Kotak Mahindra 0 balance account or open a high-yield savings account to park your emergency fund. Ensure the account is easily accessible but separate from your daily spending.
• Use Emergency fund Calculator to get the desired amount you want save based on your expenses.
• Start Auto Sweep facility in your bank account in which you're currently saving your emergency funds
• Any bonuses, tax refunds, or unexpected income should go directly into your emergency fund.
• Finally when required amount has been saved, then just put 60% of it in a FD of a reputed bank with highest interest rates, low charges and best withdrawal facility possible
• Keep remaining 40% in a bank of your area with best offline & online experience
• After all this arrangements Not Before, start a SIP as per your earnings, goals & risk appetite. Also consider Health & Life Insurance.

Take every decision Wisely based on your own research & analysis, not solely on others recommendation

 

[zacobite]

Plus make sure to make atleast 1 transaction in every 6 months or else your account get freezed means you can deposit as long as want but when you try to withdraw then first you have to visit branch and do KYC.
Everyone Knows how irritating the offline experience is in most PSUs, unless you have special relation with bank officials Or your branch is an exception

thats the whole point of psu.. difficult so withdrawal will be restricted

 

[zacobite]

• Get a Virtual Debit Card before closing Physical Debit Card to avoid above mentioned inconvenience Or Use your Kotak Mahindra 0 balance account or open a high-yield savings account to park your emergency fund. Ensure the account is easily accessible but separate from your daily spending.
• Use Emergency fund Calculator to get the desired amount you want save based on your expenses.
• Start Auto Sweep facility in your bank account in which you're currently saving your emergency funds
• Any bonuses, tax refunds, or unexpected income should go directly into your emergency fund.
• Finally when required amount has been saved, then just put 60% of it in a FD of a reputed bank with highest interest rates, low charges and best withdrawal facility possible
• Keep remaining 40% in a bank of your area with best offline & online experience
• After all this arrangements Not Before, start a SIP as per your earnings, goals & risk appetite. Also consider Health & Life Insurance.

he is starting off.. keep it simple

 

[TaxWiser]

thats the whole point of psu.. difficult so withdrawal will be restricted

Great, Never considered it that way
But what's the point of an Emergency fund when you can't withdraw it in Emergency

 

[TaxWiser]

he is starting off.. keep it simple

I personally think: "The more knowledge or information one has, the better decisions one can make"
The only drawback is it requires self effort & time, which shouldn't be an issue considering End Result.

 

[zacobite]

I personally think: "The more knowledge or information one has, the better decisions one can make"
The only drawback is it requires self effort & time, which shouldn't be an issue considering End Result.

Good thought.. However the person is starting off trying to build a basic emergency fund.Guiding him with the start to ensure that it remains simple and achievable will be of greater help. If we suggest a complex plan of financial planning, may not really be relevant or required...No one asked him to close a physical card. He is trying to start and has 32k income, you are asking him to use emergency fund calculator. Horses for Courses ..Just saying

 

[zacobite]

Great, Never considered it that way
But what's the point of an Emergency fund when you can't withdraw it in Emergency

do your math.. using your emergency fund calculator.. how long will he have to save / how much to build his corpus.. Once he builds it.. the PSU bank still exists. He can still withdraw.By then anyway hopefully with all the suggestion on SIP and Insurance etc.that you have share will also start with increase in income..

 

[TaxWiser]

Good thought.. However the person is starting off trying to build a basic emergency fund.Guiding him with the start to ensure that it remains simple and achievable will be of greater help. If we suggest a complex plan of financial planning, may not really be relevant or required...No one asked him to close a physical card. He is trying to start and has 32k income, you are asking him to use emergency fund calculator. Horses for Courses ..Just saying

do your math.. using your emergency fund calculator.. how long will he have to save / how much to build his corpus.. Once he builds it.. the PSU bank still exists. He can still withdraw.By then anyway hopefully with all the suggestion on SIP and Insurance etc.that you have share will also start with increase in income..

Without knowing proper expense amount & family's financial condition, I can't do my maths
That's why I mentioned everything possible from my side. Hoping he can extract the best out of it.
Also, According to basic principles, emergency funds should be kept in a place where you won’t face any issues managing them at any point in time.

Just my thoughts

 

[zacobite]

Without knowing proper expense amount & family's financial condition, I can't do my maths
That's why I mentioned everything possible from my side. Hoping he can extract the best out of it.
Also, According to basic principles, emergency funds should be kept in a place where you won’t face any issues managing them at any point in time.

Just my thoughts

32k income.. He is still starting..peace

 

[zacobite]

Without knowing proper expense amount & family's financial condition, I can't do my maths
That's why I mentioned everything possible from my side. Hoping he can extract the best out of it.
Also, According to basic principles, emergency funds should be kept in a place where you won’t face any issues managing them at any point in time.

Just my thoughts

yeah.. and easier to manage means easier to dip into.. discipline takes time.. so we have to use some controls... i am sure you are seeing in this forum the craze to accumulate cards for miniscule gains.. apply / reject / close / chase... easier said than done.. and btw.. I respect and completely agree with your info.. it is pertinent.. just not relevant in this case.. keep spreading the good words and help people plan and live better financial lives.. cheers mate

 

[TaxWiser]

yeah.. and easier to manage means easier to dip into.. discipline takes time.. so we have to use some controls... i am sure you are seeing in this forum the craze to accumulate cards for miniscule gains.. apply / reject / close / chase... easier said than done.. and btw.. I respect and completely agree with your info.. it is pertinent.. just not relevant in this case.. keep spreading the good words and help people plan and live better financial lives.. cheers mate

Agreed

 

[destello]

With all above discussion, what I understand is i need to focus on emergency fund first instead of SIP.
Although i have health insurance of parents and term life of myself which cost me ~ 3,800.
I have 2 SIP, 1k and 2k.
I don't need to send money at home by god grace situation is fair.
With all monthly expenses, bill, traveling and outing i left with ~3k.

Doubts:
1. Should I stop SIP?
2. How much of monthly should i save to gain emergency fund.
3. Is there any percentage that we should keep aside to collect emergency fund like we have rule of 20-30-50.
4. Can i do sip and collecting emergency fund at same time?

 

[destello]

I have SBI account, i mentioned in question

Set up PSU BANK account.. dont activate atm or net banking. - Move 3 -5 K to this account on SALARY DAY... and dont touch it.

 

[TaxWiser]

With all above discussion, what I understand is i need to focus on emergency fund first instead of SIP.
Although i have health insurance of parents and term life of myself which cost me ~ 3,800.
I have 2 SIP, 1k and 2k.
I don't need to send money at home by god grace situation is fair.
With all monthly expenses, bill, traveling and outing i left with ~3k.

Great
You've got a solid understanding of the importance of an emergency fund.

Doubts:
1. Should I stop SIP?
2. How much of monthly should i save to gain emergency fund.
3. Is there any percentage that we should keep aside to collect emergency fund like we have rule of 20-30-50.
4. Can i do sip and collecting emergency fund at same time?

Let's tackle your doubts one by one:

1. Should I stop SIP?

- It's generally a good idea to prioritize building an emergency fund. You might consider pausing your SIPs temporarily until you have a comfortable emergency fund in place.​

2. How much should I save monthly for an emergency fund?

- Aim to save at least 6 months worth of expenses. If your monthly expenses are ₹32,000, you should target around ₹1,92,000. With ₹3,000 left each month, it will take some time, but consistency is key. Consider before mentioned tips for emergency funds.​

3. Is there a percentage to save for an emergency fund?

- A common rule is the 50-30-20 rule: 50% for needs, 30% for wants, and 20% for savings. You can adjust this to prioritize your emergency fund, perhaps saving 30-50% of your income until you reach your goal.​

4. Can I do SIP and collect an emergency fund at the same time?

- Yes, you can. Consider allocating a portion of your savings to the emergency fund and the rest to SIPs. For example, you could save ₹2,000 for the emergency fund and continue one SIP of ₹1,000.​

Balancing both goals is possible with a bit of planning. Keep track of your progress and adjust as needed. You've got this!

(Summarized Using Gemini AI)

 

[zacobite]

I have SBI account, i mentioned in question

good.. so use it to plan

 

[bhavin.sutaria]

I heard a lot about emergency fund. It should be some amount of money which will last for 6-12 month in cause of accidental situation, i.e loss of job, medical emergency or natural disaster.

I want to save Emergency fund for 6 month,
I have ₹32,000 per month. With all my expenses and investment i left with hardly 2k to 3k at end of month.

Now i have kotak mahindra 0 balance account and hdfc salary account and SBI account.

Now if i want to save Emergency fund, what is the procedure?

Whatever you can save, is a drop into the target goal and even one drop is good. Whatever you save at month end, you can invest in 4 ways:

1. A portion of emergency fund should be in savings account for quick availability times of emergency. Say you want to save 30k * 12 months = 3,60,000. Keep 50k to 100k in savings account.

2. You can use FDs to invest the remaining fund. For that, each FD needs to be of amount equal to one month's expense. Considering your savings is very small each month, it can be a tough task to accumulate the amount before investing. Alternatively you can invest as little as 5k monthly in each FD and do FD laddering so that once FDs start maturing, you have the option to keep the money for expenses or reinvest it in FD. Ideal time horizon for each FD is 1 year.

3. Recurring deposit can be easier in your case compared to FDs. You can do this easily with 2k to 3k savings per month. If you can save more than that, even better. Ideal time horizon will be 12 months of RD. Interest earned will be much less than FD.

4. Liquid funds is another way to save. You can choose a liquid fund with less volatility, large AUM and least expense ratio for investing monthly savings. Whenever needed, you can apply online for withdrawal.

Taxability: FDs and RDs are beneficial if your tax bracket is low. If you fall in 15% or higher tax bracket, I would suggest liquid funds since the tax rate beyond 3 years (LTCG) would be 12.5%.

For liquid funds, make sure to check it's volatility and credit rating to ensure funds safety. Ideally they are less volatile, unless there is a sudden drop in interest rates.