Another thing you can save is increments. As your salary increases over time, you can even save up to 50% of your salary. After all, your expenses are not going to increase that much. So your contingency fund can go up accordingly.

The amount saved for a contingency fund varies from one person to the next. It depends on factors like in-hand salary, number of financial goals, monthly expenses etc.

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• From Bonus

If you happen to get a quarterly/ half-yearly/ yearly bonus from your company, don't blow it up. It is the ideal way to start your contingency fund, especially if your salary is not enough to save too much.

Even if you bonus comes at a festival time and you really want to buy that exquisite saree, act as though you haven't even got that bonus. It may be difficult, but it is worth it when you really need the money the most.

• From Gifts

Cash gifts, whether for your birthday, wedding anniversary or even out of the blue, can be saved towards your contingency fund. Yes, your best friend may have told you she is giving you the money to buy that bag you really wanted. But if you don't need the bag that bad, you could save up the money.

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Saving Money is Not Enough

Don't be content with putting some amount of money away every month. Let the money work for you and allow it to grow as far as you can.

The important thing to remember is that the money should be in a liquid state as far as possible. You should not lock it in for a very long period of time. Otherwise you will not have access to it when you really need it.