Middle class need to plan wisely in order to ensure that one medical setback or a sudden job loss does not set them on a path to financial crisis. Thus, building an emergency fund to keep you safe through the troubled times is key.
Here, Chartered Accountant (CA) and financial advisor Nitin Kaushik believes that well begun is half done. He noted that changing dynamics, a volatile job market and high interest debt has reshaped how you should save in order to insulate against sudden financial shocks.
‘The math of survival has changed’
In a series of posts on social media platform X (formerly Twitter), Kaushik noted that for most people in 2026, the lifeline that is your salary is a “frayed line” that is “ready to snap”. He added that a single medical emergency or losing your job, could result in “a mathematical trap”.
“If your income stops, your rent, (equal monthly installments), and school fees don’t. Without a buffer, you aren’t just unemployed you are insolvent. The math of survival has changed,” he added. How so? According to Kaushik, while 10 years back, three months of savings was the “gold standard” the current 5-6% inflation crawl, coupled with a volatile job market has made having six months of salary in savings as “the absolute floor”.
This further increases to one years’ worth of in savings if you have a family or aging parents, he added.
How much do I need to an emergency fund?
According to Kaushik, you have to start your calculations “with the raw essentials”. This includes your monthly spend on groceries, insurance, rent, and utilities, among other things. Next you need to calculate the six month, and one-year financial buffer needed to service these essential requirements in case of an emergency or .
He broke it down: If your monthly burn (monthly expenditure) is ₹40,000, your survival fund isn’t a suggestion — it’s a ₹2.4 lakh shield (six months cumulative). For freelancers who may not have a steady flow, or other high-risk sector jobs, at ₹40,000 expenditure, you will need to have ₹4.8 lakh in savings, “just to stay level”.
Being prepared includes that takes into account your monthly expenses and future requirements, plus factors outside your control.
How should I start building an emergency fund?
The CA noted a few steps to follow: “Don’t let the sit idle, but don’t let it get stuck. A standard savings account at 3% is a guaranteed loss against inflation.”
- Use a sweep-in fixed deposit () for the first ₹1 lakh; it gives you 6-7% returns with instant liquidity.
- For the rest, liquid mutual funds (MFs) offer T+1 redemption and slightly better post-tax efficiency.
- Build it in two stages. In phase one: Save one month of expenses ( ₹40,000) by cutting every non-essential for 60 days. Kaushik called this your “mini-fund” to stop you from reaching for when the car breaks down or the fridge dies.
- For phase two: Automate the rest that you need to save either through a recurring deposit (RD) or a liquid fund systematic investment plan (). “Treat this like an EMI you owe to your future self,” he added.
- Kaushik also suggested using “every bonus, tax refund, or side-hustle check” to pad your savings until you hit your six-month target.
“The data is clear: 76% of Indians without an emergency fund end up in a high-interest debt trap during a crisis. The fund isn’t about growing wealth; it’s about making sure a bad month doesn’t turn into a bad decade,” he added.
Edelweiss Mutual Fund Chief agrees, “Tax is deducted at source. Why not do the same with your savings? That’s SDS — Savings Deducted at Source. Automate your SIPs, RDs (recurring deposits) or FDs (fixed deposits) before you even see the money.”
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