How a 3-Year SIP Can Help You Create a ₹5 Lakh Emergency Corpus?

An emergency fund acts as a financial cushion during unforeseen circumstances like sudden medical expenses, job loss, or urgent repairs. Ideally, this fund should be equal to at least 6–12 months of your household expenses. A Systematic Investment Plan (SIP) in mutual funds can be an effective way to build such a fund gradually. Let’s look at how you can create a ₹5 lakh emergency corpus in just three years.

The Goal: ₹5 Lakh in 3 Years

Suppose your target is to save ₹5 lakh within the next 36 months. Instead of putting aside a large lump sum, you decide to invest monthly through SIPs. By investing in a mutual fund that delivers around 10% annualised returns, you can steadily move closer to your goal.

Example Scenario

Let’s say you start a SIP of ₹12,000 per month. Over 3 years, you would invest:

Total investment = ₹12,000 × 36 months = ₹4,32,000

Now, assuming an average annual return of 10%, your investments could grow to around ₹5,00,000 at the end of the 3-year period. The estimated returns can be around ₹73,560. 

The extra growth comes from the compounding effect of SIPs, where not just your contributions, but the returns earned also start generating further returns over time.

If you can increase the SIP slightly to ₹12,500 per month, your final corpus could exceed ₹5 lakh comfortably, giving you a safety margin for emergencies.

Why SIP Works for Emergency Planning?

• Disciplined Saving: Regular monthly contributions build the habit of saving.
• Achievable Target: Breaking a large goal into smaller, manageable parts makes it less overwhelming.
• Flexibility: You can increase, reduce, or pause SIPs depending on your situation.

Also Read: SIP Planning: Can SIPs Help You Save ₹25 Lakh in 10 Yrs for Your Child’s Education?

Conclusion

Creating an emergency corpus of ₹5 lakh in 3 years is possible with a planned SIP approach. By starting a ₹12,000–₹12,500 monthly SIP, you can achieve this goal without straining your finances. To plan better, you can use a SIP calculator to try different monthly contributions and timelines, ensuring your emergency fund is ready when you need it most.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.