₹90,000 rule to weather crises: CA warns emergency fund is ‘not your side hustle’

In a widely shared post on X (formerly Twitter), Chartered Accountant Nitin Kaushik cautioned investors against chasing returns at the cost of financial security, calling the emergency fund “the most misunderstood fund in personal finance.” 

“Everyone’s chasing returns. But here’s what they don’t tell you — there’s one place where earning less can actually save you more,” Kaushik wrote, stressing that the primary goal of an emergency fund is instant accessibility, not yield. 

Kaushik highlighted the common mistake of moving readily available cash from a savings account into mutual funds or fixed deposits for higher returns, only to face delays or penalties when an actual emergency strikes. “Emergencies don’t come with a T+2 notice. They demand action. Instantly,” he noted. 

He proposed a “3-3-3 rule” for structuring emergency reserves: ₹30,000 in a high-interest savings account for immediate access, ₹30,000 in a sweep-in fixed deposit for slightly better returns without losing liquidity, and ₹30,000 in a liquid mutual fund as a secondary backup. He also advised against using hybrid or equity funds for emergencies and underscored the importance of health insurance with proper riders. 

“Your emergency fund is your safety net — not your side hustle. Trying to squeeze returns from it is like locking your fire extinguisher in a safe to keep it shiny. Doesn’t help when there’s a fire,” Kaushik remarked. 

The post drew significant engagement online. One user commented, “Emergency funds aren’t about maximizing returns — they’re about peace of mind during market volatility. In India’s current scenario with inflation at 5.1%, even a 4% savings rate beats the stress of liquidating equity in downturns. Security > Speculation!”