How to build an emergency fund in Covid-19 economy

We have been harping on building an emergency fund for the last few months.


It is the total liquid funds at your disposal divided by average monthly expenses. It gives you an idea about the period for which you can survive without the regular income.

A finer point here is to include only essential expenses – cost of living as we choose to call it, rather than your normal lifestyle expenses. It helps to stretch the funds for a longer period of time.

For sometime, let us skip the controversy on whether the emergency fund should be sufficient for 3 months, 6 months or a year’s expenses. Decide what is feasible for you, and move ahead.

The employment and emoluments scenario is gradually improving. Yet, we know that we need to be prepared for similar force de majeure events in future.


There were knee-jerk reactions when people stopped investing in Systematic Investment Plans to create liquidity. One needs to always check the cost:benefit aspect of a financial move.

  • What are the returns you get from your present investment?
  • How many hours/days will it take to withdraw money from that investment if needed. Does it necessarily have to be lying in a savings account with a low interest rate of 3.5%?


1. I don’t have one, but I don’t need one.

Great! March on, yet it may make sense to start building one.

2. I don’t have one, but badly need it

  • Cut down on all unnecessary expenses – gym memberships, subscriptions which can be discontinued, shopping for clothes and accessories, ordering food online. There could be a few others, if not this. There are plenty of free knowledge resources floating around to replace these addictions. Tweak your lifestyle.


  • Negotiate with your creditors to reschedule repayment – credit cards, home loans, vehicle loans, personal loans etc.


  • Check your idle assets – unused property, furniture, gadgets – can you rent it out?


  • Can you get a loan against your investments? – National Savings Certificates, Kisan Vikas Patra, Fixed Deposits, insurance policies etc.  Remember that these loans come in the form of overdraft limits, and you will pay interest only for the amount utilised. One has to bear the cost of documentation, which is miniscule.


  • Can you withdraw money from Employee Provident Fund, or take an overdraft against PF from your employer?


  •  Can you get an interest-free loan from your friends/relatives?


  • Do you own a printer or software to make e-books/videos/elearning courses? Start selling services to help the large majority working online. You may register on freelancing sites like Fiverr, Upworks, Freelancer etc.


  • If you run a business, get student interns to work free for 2-3 months. Sites like Internshala may be of help.


  • Are you good at creating content? Start selling.


  • Do you have a skill you can teach others, to earn extra money?


Remember the suicides after PMC Bank was placed under moratorium? Do you think they would never have recovered their money, or found the means to survive till the money was recovered?

It is more about a mind-set.

What if these people had diversified investments and spread it over different asset classes?

You need that assurance, the peace of mind, the comfort level that you and your family are safe. The rest takes care of itself, as pathways emerge.

Create that comfort level, but not by keeping idle cash at home, or money in low-interest savings accounts and mobile wallets.

Keep money where it is accessible.

Speak to your banker or financial advisor about how long will it take to retrieve the amount.

Educate your family on how they should go about getting funds, if something untoward happens. Reassure them that all is well.

Then, go ahead and enjoy the family time together. You may not get it again…


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