What happens if you lose your job for six months?
With ₹1 lakh saved, the money runs out in month 2 and ₹2 lakh must be borrowed. See how an 8-month emergency fund carries you, and where to keep it.
6 min read
Layoffs rarely come with notice. Say your salary stops tomorrow, and it takes 6 months to find the next job. What happens to your money?
Take a household spending ₹40,000 a month on essentials, with a ₹10,000 EMI and one dependent. Their savings decide whether those 6 months are stressful, or a disaster.
Month by month without a salary
With no income, every month costs essentials plus EMIs: ₹50,000. EMIs don't pause, and insurance premiums still fall due. Spending as usual adds another ₹15,000.
Figure 1 from the Emergency fund calculator
Savings through 6 months without pay
How to read it
- 1With ₹1 L saved, the money is gone after 2 months, even spending only on essentials.
- 2By month 6 they've borrowed ₹2 L. As a personal loan at 14% repaid over two years, that costs about ₹30.5K in interest.
What happens when the savings run out
Without a fund, the gap gets filled in ways that cost more later:
- Credit cards at 36–42% a year, or a personal loan at 12–24%, approved more easily while you're still employed.
- Selling investments at the wrong time. A job loss often comes with a market fall, so selling then locks in the loss.
- Missed EMIs, which hurt your credit score and make the next loan dearer.
How big a fund protects you
The emergency fund calculator starts from 6 months for a private-sector salary and adds 2 more for a sole earner with dependents: 8 months, or ₹4 L here. Saving ₹15,000 a month, it takes about 19 months to build from ₹1 L.
Keep it where you can reach it, without risk. Bank deposits are insured up to ₹5 lakh per depositor per bank.[1]
Figure 2 from the Emergency fund calculator
Where to keep a ₹4 L emergency fund
- Savings account₹50,000
- Sweep-in FD₹1 L
- Liquid mutual fund₹2.5 L
How to read it
- 1A month in your savings account for the first bills, two in a sweep-in FD that breaks when needed, and the rest in a liquid fund, which pays out the next working day.
How many months of expenses to keep covers the sizing in more detail.
Try it with your numbersEmergency FundEnter your essentials, EMIs and savings. See how many months you're covered, your target, and when you'll reach it.
If it happens: the first month
- Cut to essentials straight away. Every month of wants you skip is more runway.
- Keep paying EMIs, insurance and rent on time. Ask your lender about a moratorium only if you must.
- Pause SIPs; don't sell. Draw on the emergency fund first, then FDs and debt funds, and touch equity last.
- Arrange health cover. Group insurance usually ends with the job. A personal policy, or porting the group cover, keeps you covered.
- Check your dues: final settlement, leave encashment, gratuity after five years, and your PF, which you can partly withdraw after a month without work.
What this doesn't mean
- Six months is an example. Some searches take longer; the more you've saved, the more choice you have.
- Severance helps but isn't a plan. Treat it as a bonus, not as part of your runway.
- Your numbers differ. Use your own essentials, EMIs and savings in the calculator.
Essentials ₹40,000 and EMI ₹10,000 a month; one dependent; no second income; own health cover. Savings drawn down without interest. For illustration only, not financial advice.
Sources
- [1]Deposit insurance: bank deposits insured up to ₹5 lakh per depositor per bank (opens in a new tab)Deposit Insurance and Credit Guarantee Corporation (RBI)