Why you must build a Contingency Fund - Especially in uncertain times

India leads in vulnerable employment: 74% of our workforce holds insecure jobs (own-account or contributing family work), the highest share among G20 nations. (https://www.forbesindia.com/article/news/graphic-of-the-day-indias-job-market-insecurity-and-vulnerability/2987204/1)

That tells us something important, many people today don’t have guaranteed job security.

In times of disruption - whether due to layoffs, business decline, pandemics, or technological shifts.. what do you do when your income stops? That’s precisely where a contingency fund becomes your financial backbone.

1.⁠ ⁠What is a Contingency Fund?

A contingency fund is a safety reserve set aside to meet sudden, unexpected financial needs — especially when your income halts.

Whether you are a salaried employee, a business owner, or a professional taking a break to upskill, a contingency fund ensures you’re not forced to borrow at high cost or deplete essential savings.

2.⁠ ⁠Why it’s crucial today

Volatile job markets: Automation, AI, and industry disruption can cause unexpected job losses.

Pandemic lessons: COVID-19 showed how quickly business operations can shut down and income can vanish.

Career transitions: You might take a break to upskill or switch industries, creating a period without salary.

Business risk: For entrepreneurs, external factors like regulatory changes, infrastructure issues, or supply chain disruptions can halt revenues.

In all these scenarios, your day-to-day expenses don’t pause. That’s why you need a buffer.

3.⁠ ⁠How to build your Contingency Fund

a. Define “contingency”

A contingency is any sudden stoppage of income - due to job loss, career change, business slowdown, or force majeure events.

b. Start with a baseline

Set aside a minimum of 3 months’ worth of expenses as your initial goal. This ensures you can manage for a short period without income.

c. Use safe, liquid instruments

Your contingency fund isn’t for high returns. It should be kept in investments you can withdraw without loss — like liquid debt schemes or high-liquidity accounts.

d. Grow it gradually

Once 3 months’ cover is in place, aim for 6 to 12 months’ cover as your next milestone. The more cushion you build, the less stress when disruption hits.

e. Maintain discipline

Don’t touch the fund unless it's truly necessary. If you use a part, rebuild it as soon as you can.

4.⁠ ⁠What this means for you

With a strong contingency fund:

You avoid panic decisions.

You can focus on finding the right opportunity instead of accepting the first job you find.

You protect long-term investments, insurance coverages, and financial stability.

At Karyam Finserv, we guide you in creating a safe, realistic contingency plan — one that fits your goals, lifestyle, and risk tolerance.

Want help building your contingency plan?

Let’s talk - DM us for a conversation.

For more information, visit: https://www.karyamfinserv.com/blank-6-1-2-1