Having enough cash in hand for emergencies or any unexpected large spending could be critical to avoid a financial crisis. Any unforeseen situations like job loss, medical emergencies or a big-ticket expense may completely disrupt your monthly budget. Relying on a quick personal loan or a credit card may provide temporary relief, but it will increase overall financial burden.

That's where an emergency fund comes in handy. While setting aside money for unplanned expenses is a smart move, many people struggle to make it a priority. Saving even small amounts regularly can go a long way in ensuring financial security.

An emergency fund is a financial cushion specifically for unexpected expenses like hospital bills, urgent repairs or job loss. This fund should be kept separate from your regular savings to ensure it is available when you actually need it.

Having an emergency fund can prevent you from falling into a debt trap or diluting your savings meant for long-term goals like retirement planning.  Even if you have a high salary or a healthy bank balance, an emergency fund offers peace of mind.

• Finalise Emergency Fund Amount

Before you start saving, calculate how much you spend every month. It may include rent, utilities, groceries, transport, insurance, loan payments and other essential costs. Multiply that figure by six. That's your target amount for the emergency fund.

• Set Realistic Goal, Timeline

Don't aim to save six months' worth of expenses overnight. Break it down into smaller monthly or quarterly goals. For example, if your monthly expenses stand at Rs 50,000, your target is to have an emergency corpus of Rs 3 lakh. If you plan to reach this goal in 12 months, you need to save at least Rs 25,000 a month.

• Open A Separate Savings Account

Keep your emergency fund in a separate high-interest savings account or a liquid mutual fund. This keeps the money accessible in emergencies but reduces the temptation to withdraw the amount for daily expenses or impulsive purchases.

• Automate Your Savings

Set up automatic transfers from your salary account to your emergency fund account every month. Automating the process ensures consistency and makes saving a habit. Start with an amount you can manage and increase it as your income grows. 

• Cut Back On Non-Essentials

Review your monthly budget and look for areas where you can trim spending — like dining out, subscriptions you rarely use or non-essential shoppings. Redirect that money into your emergency fund. Even saving Rs 2,000 to Rs 5,000 a month can make a significant difference over time.

• Use Windfalls Wisely

Got a bonus, tax refund or any unexpected income? Instead of spending it all, put a portion, or all, of it into your emergency fund. These lump sums can help you reach your target faster without affecting your monthly budget.

Keep It For Real Emergencies Only

Once your emergency fund is in place, use it strictly for genuine emergencies and not for vacations or shopping. This discipline ensures that the fund is ready when life throws the unexpected at you.

To conclude, building an emergency fund to meet six months' expenses is not a tough tax, but it needs financial discipline. Plan it well and follow the predetermined timeline to achieve your goal. You can divert a small amount every month into a single investment option, or multiple schemes as per your financial goal.