An emergency reserve can reduce the risk of being forced to sell long-term investments at the wrong time simply because cash is urgently needed.
What an emergency fund is for
It is money reserved for unexpected but necessary expenses or temporary income disruption—not for planned purchases.
How much is enough
There is no universal number. Job stability, dependants, EMIs, insurance coverage and household-income variability all matter.
Where it belongs
Emergency money should prioritise access and stability over maximum return.
Review it annually
As expenses and responsibilities change, an old emergency-fund target can become inadequate.
This article is general information and does not consider your income, liabilities, goals, risk profile or tax situation. Market-linked investments can lose value. Insurance is subject to policy terms.