How big should an emergency fund be in India?

Six months of unavoidable expenses is the usual answer, and for a lot of salaried people that lands somewhere near ₹2 lakh. With ₹25,000 already saved and an RD paying 6.5%, that takes ₹6,712.26 a month for two years. If your rent alone is ₹25,000 you need more than that; work from your own outgoings, not a round figure.

Where should I keep money for a goal that is one to three years away?

Somewhere that cannot fall in value on the month you need it: a recurring deposit, a sweep-in FD linked to your savings account, or a liquid fund. Not equity, not a hybrid fund, not gold. A market dip in the wrong month turns a Goa trip into a cancelled Goa trip.

What interest rate should I enter?

The rate you can actually get on the product you will use. RDs at the big banks are paying roughly 6.5 to 7% for one to two years, small finance banks a bit more, and a savings account only 2.5 to 3%. Liquid funds have been in the same 6 to 7% range but are not guaranteed. Check the rate card the day you start, rates move.

Why is the monthly figure lower than the target divided by the months?

Interest does part of the work. Dividing ₹1,75,000 (the ₹2 lakh target less ₹25,000 saved) by 24 months gives ₹7,291.67. At 6.5% the ₹25,000 grows on its own and each deposit earns for the months left, so ₹6,712.26 is enough. The gap grows with a longer deadline and a higher rate.

Can I use this to plan a SIP?

For goals under about three years, yes, with a debt or liquid fund rate. For a longer equity goal the SIP calculator is the right tool because it lets you think in expected returns, and you should knock a couple of percent off whatever return you hope for, since the last year before a goal is the one you cannot afford to be down in.

Should I count what is in my salary account as already saved?

Only if you will genuinely not touch it. Money sitting next to the UPI balance gets spent on Swiggy and Diwali. Move what you are counting into a separate RD or FD on day one, then enter it here; if it is still mixed in with your spending money, enter zero and let the tool be honest with you.

Savings Goal Calculator: Monthly Saving for a Target

Give the goal a name and a date before you touch the numbers

“Save more” is not a goal and no calculator can help with it. “₹2 lakh in an emergency fund before next Diwali” is a goal, and it has the four things the tool needs.

Target amount. The rupee figure at the end. For an emergency fund, six months of the expenses that do not stop if the salary does: rent, EMI, school fees, groceries, the electricity bill, parents’ medicines. Not six months of your salary.
Already saved. Only money that is genuinely set aside. The ₹25,000 sitting in the salary account next to the UPI balance does not count; it will be gone by the 20th. Move it into a separate RD or FD first, then enter it.
Interest rate. What the product will actually pay. RDs at the large banks have been paying roughly 6.5 to 7 percent for one to two year tenures, small finance banks somewhat more, a savings account 2.5 to 3. Use the rate on the card the day you start.
Time to save. Years, with halves allowed. Eighteen months is 1.5.

Goals this tool is built for: the emergency fund, a ₹60,000 Goa trip with friends next December, ₹30,000 down payment on a bike so the EMI is bearable, ₹1.5 lakh for a child’s school admission that falls due in eighteen months. Anything with a fixed rupee amount and a fixed date within about three years.

The ₹2 lakh emergency fund, month by month

The formula is the future value of a recurring deposit, rearranged to solve for the deposit:

PMT = (FV − PV × (1 + i)^n) × i / ((1 + i)^n − 1)

FV is the target, PV what you already have, i the monthly rate (yearly rate ÷ 12) and n the number of months. Deposits are assumed on the last day of each month.

With the defaults, ₹2,00,000 target, ₹25,000 already saved, 6.5 percent, two years:

i = 6.5 / 100 / 12 = 0.0054167
n = 24
(1 + i)^n = 1.138429

PV grows to  = 25,000 × 1.138429 = 28,460.72
shortfall    = 2,00,000 − 28,460.72 = 1,71,539.28
PMT          = 1,71,539.28 × 0.0054167 / (1.138429 − 1)
             = 6,712.26


Save each month	₹6,712.26
You put in	₹1,86,094.26
Interest covers	₹13,905.74
Balance at the deadline	₹2,00,000.00

Without any interest at all it would be ₹1,75,000 ÷ 24 = ₹7,291.67 a month. The RD rate saves you ₹579 a month, or about ₹14,000 over the two years. Not life-changing, but it is the difference between the instalment fitting the budget and not.

The same target, different deadlines

Time to save	Monthly amount
1 year	₹14,018.54
2 years	₹6,712.26
3 years	₹4,280.24

Halving the deadline more than doubles the instalment, because there are fewer months and the interest has less time to work. This is the argument for starting the emergency fund now at ₹4,000 a month rather than in a year at ₹14,000, and it is also the reason the first month after an appraisal is the right time to raise the standing instruction.

Three smaller goals

Goal	Target	Saved	Rate	Time	Per month
Goa trip in December	₹60,000	₹0	6.5%	1 year	₹4,852.79
Bike down payment	₹30,000	₹5,000	6.5%	6 months	₹4,083.52
School admission	₹1,50,000	₹20,000	7%	1.5 years	₹6,754.05

The bike row is the one to notice: over six months, interest contributes ₹498.91 and the rest is your own money. For short goals the rate barely matters and the discipline is everything. Pick whichever product you will not raid.

RD, sweep-in FD or liquid fund: where the money should sit

For a goal under three years the money has one job, which is to be there on the day. That rules out equity, hybrid funds, gold and anything a relative describes as “guaranteed 15 percent”. The three sensible homes:

Recurring deposit. Fixed instalment, fixed date, fixed rate, auto-debit on the 5th so the decision is made once. Interest compounds quarterly and is taxable at your slab, with TDS at 10 percent once bank interest crosses ₹50,000 in the year for FY 2025-26. Missing an instalment attracts a small penalty and, more usefully, a message from the bank. The RD calculator will show the maturity value for a given instalment, which is this calculation run forwards.

Sweep-in FD. A savings account with an FD attached; any balance above a threshold is swept into a deposit, and a debit card swipe or UPI payment breaks just enough of it to cover the amount. Good for the emergency fund specifically, because an emergency does not wait for a branch visit. The rate on the swept portion is the FD rate for however long it actually stayed, and most banks apply a premature closure penalty, so the effective rate is a bit under the card. Compare with the FD calculator.

Liquid fund. Groww, Zerodha Coin, the AMC app. Returns have sat in the same 6 to 7 percent range as RDs, redemption reaches the bank the next working day (some allow ₹50,000 instantly), and there is no lock-in or penalty. The return is not guaranteed and is taxed as income at your slab whenever you redeem, so enter a slightly lower rate than the fund’s last-year figure.

What I would not do is put a two-year goal into an equity SIP. The last twelve months before the date are the ones you cannot afford to be down in, and markets do not consult the calendar. For a five-year-plus goal the SIP calculator is the right tool and a different conversation.

Where the plan breaks in practice

The instalment is right; the plan still fails, and it usually fails in one of these ways.

The goal was priced at this year’s cost. A school admission quoted at ₹1.5 lakh now will be ₹1.6 lakh or more in eighteen months. Either put the future price in the target box, or subtract 5 or 6 percent from the interest rate to work in present-day money. Doing neither leaves you a few thousand short on the day.

The already-saved figure was optimistic. If ₹25,000 was really ₹25,000 minus next month’s insurance premium, the tool is solving the wrong problem. Enter the amount that is in a separate account with nothing due against it.

The RD was booked at a rate that then changed. It does not, for a booked RD; the rate is locked at opening for the full tenure. But a plan that assumes 7 percent because that was the rate last March may find 6.5 on the card in September. Rates move a few times a year; check the day you open.

One goal was funded by breaking another. The emergency fund exists so the Goa trip does not go on a credit card at 36 percent, and the Goa trip fund exists so the emergency fund is not raided for a holiday. If you are running more than one goal, run them as separate RDs with separate names in the app, and put the emergency fund first every time.

The deposit date drifted. The formula assumes the money goes in every month. A standing instruction on the day after salary hits is the whole trick; a manual transfer “when I remember” is a plan with about ten instalments a year in it.

If the goal is actually a loan you are trying to avoid, run the alternative too. A ₹30,000 down payment saved over six months versus that ₹30,000 added to the bike loan at 12 percent: the EMI calculator will show what the second option costs, and it is nearly always more than the ₹498.91 of interest the RD earns you.

Savings Goal Calculator