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Other Than Saving Account These Are Best Options To Park Emergency Fund
Financial ups and downs are a part of life. Furthermore, financial challenges or troubles can occur without warning. As a result, it is in your best interests to be ready to deal with them at any time. This necessitates possessing a substantial emergency fund. In the event of an emergency, your emergency fund is your go-to money. It's the fund you'll need to set up for a variety of contingencies. This might include medical costs, legal fees, unexpected home repairs, job loss, and so forth. This is the money that must be available at a moment's notice.
Short Term Recurring Deposits
The Recurring Deposit option allows you to save money over time by making recurring monthly contributions of a specified amount. You may save money by making tiny recurring donations and earning interest on your savings/emergency reserves.
You may open a Recurring Deposit account with a variety of financial organizations, including banks, non-bank financial companies, and even post offices. While the minimum amount varies for each institution, you may typically start with a significant little sum.
Another option for investing money for a shorter period of time is a short-term bank fixed deposit.
Debt Mutual Funds
Funds in the liquid and overnight categories would be the most accessible investment instrument. When it comes to investing for a very short time or building a contingency fund, these categories have a lot of options.
Liquid Mutual Fund
While cash is the easiest to get, a liquid fund withdrawal is also not difficult. An individual can file a redemption request on the mutual fund website by stating the folio number before the deadline and having the money credited to the registered bank account the next working day. A liquid fund is a debt fund that invests in financial assets with a maturity of fewer than 91 days. These are high-rated debt products that are not influenced by interest rates. As a result, they produce respectable returns while being stable. Liquid funds have produced returns of up to 8% in recent years.
Overnight Mutual Funds
Instant encashment is possible with overnight money. Overnight mutual funds are well-known for being investor-friendly and offering a variety of advantages. Overnight funds are a type of debt fund that is available 24 hours a day, 7 days a week.
Overnight mutual funds are open-ended debt funds that invest primarily in overnight assets and securities, according to the SEBI.
During trading hours, investors can enter and exit these funds. The monies are held in cash at the start of each working day. After then, the fund manager will invest in bonds overnight, which will mature the next business day.
Other options, such as ultra-short-term funds, are also available.
Why Keep Emergency Fund Liquid?
An emergency fund, also known as a contingency fund, is an important aspect of your overall financial plan. The goal of an emergency fund is to create a solid financial cushion in the event of a financial disaster.
The purpose of having a liquid emergency fund is to be able to meet unforeseen costs. It is the most important factor to consider when deciding where to put your emergency cash.
You should be able to withdraw funds whenever you need them and without delay. Simultaneously, you must avoid being penalized in the form of an exit load or a pre-withdrawal penalty. The value of the investment should not depreciate and should provide exceptional returns.
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