Short answer: One month of expenses for flow, emergency fund in liquid funds/FDs, the rest working harder elsewhere.
About one month of expenses. Enough that nothing bounces and you never think about timing, and little enough that the rest of your money is doing better work somewhere else.
Why not more
A savings account pays roughly 2.7–3.5% at most large Indian banks. Inflation has generally run higher. Money parked there is losing purchasing power slowly and predictably — the loss is invisible because the rupee number never falls, which is exactly what makes it easy to ignore. On ₹5,00,000 sitting idle, the gap between a savings account and a liquid fund is on the order of ₹15,000–₹20,000 a year.
Where the rest belongs
| Money | Where | Access |
|---|---|---|
| One month of expenses | Savings account | Instant |
| Emergency fund (3–6 months) | Sweep-in FD or liquid fund | Same day to T+1 |
| Known bills within a year | Short-term FD or RD timed to the bill | On the date you need it |
| Goals beyond five years | Equity via SIP | Not for emergencies |
The sweep-in option most people miss
A sweep-in or flexi FD behaves like a savings account with a better rate: balances above a threshold automatically move into a fixed deposit, and break back out in part when you spend. It removes the decision entirely, which is why it suits the portion of the emergency fund you want close by.
When to hold more
Keep a larger float in the month a big known payment lands — a tax instalment, insurance renewal, school fees, a wedding. Keep more if your income is irregular, because a freelancer's "one month" is better measured as the longest gap between payments actually received, not the average. Both are temporary states with a date attached, not a reason to leave six figures idle permanently.
Put numbers to it with the free budget calculator and emergency fund calculator — no sign-up, works on any phone.
Set the caps from this article as category budgets in Expense Tracker: Income Manager, and see a daily safe-to-spend number that updates as you log. No sign-up, no ads.
