Want to build ₹1.5 lakh emergency fund? We calculate how much monthly savings you'll need

An emergency fund is an important component of long-term financial planning that sets aside money for unexpected, but urgent situations. This “rainy-day” fund must be separate from your regular savings. You will also need to regularly assess and adjust the savings amount to ensure that extenuating circumstances (job loss, sudden car repair, expensive medical bills) do not affect your day-to-day finances.

Experts note that sound financial planning includes provision for an emergency fund that can help future-proof your finances, build financial flexibility, and help tide over unforeseen situations without the need for loans or borrowings.

Today, we explain the 3-6-9 rule that salaried individuals and even those without stable income can use.

Building a ₹1.5 lakh emergency fund

An average investor can follow a simple thumb rule to calculate how much amount they need to accumulate as emergency fund. Clear Tax suggests that those with regular income should aim to save at least three to six months’ worth of monthly expenses, while those with unstable jobs or irregular income streams should increase their buffer to cover 9-12 months of expenses.

Those with irregular or unstable income include freelancers, individuals paid per project, etc.

Known as the 3-6-9 rule, this is a general guideline which prescribes saving for emergency as follows:

• Save three months of expenses if you are single and earn a steady income,
• Save six months of expenses if you have dependents and earn a steady income,
• Save nine months of expenses if you are single and your income is irregular,
• And save 12 months of expenses if you have dependents and your income is irregular.
• For individuals with more financial responsibilities due to medical conditions, financial obligations etc., the amount needed will be higher.