Greeting To Our Readers! 

Emergency or Contingency Fund, simply a kind of fund people create other than their savings and investment, only to tackle their financial expenses in a time of any emergency like a pandemic, job loss, and many other.

Investors generally put their money in an emergency fund intending to earn good returns from it. This desire to earn a good return is natural as an investment in general means that money should work hard and earn good returns.

However, experts advise when you invest to create an emergency, your focus should be more on liquidity and quick, easy access rather than on return generation.

Let us see what experts suggest about creating an ideal emergency fund………..

The Ideal Emergency Fund Size ……………….

The size of the emergency fund depends on various aspects such as the number of dependents, fewer earning members, jobs in risky sectors, and many. For some, an emergency fund equal to 6 months or their take-home salary is ideal while for someone else, a 12-month buffer would be better.

Basically, the size of an ideal emergency fund differs from person to person. However, having an emergency fund equal to 6-month reserves is the minimum that every person needs to build up.

Why Easy Accessibility And Not Good Returns ………………

It is very important to make sure that your emergency fund is readily accessible when needed, and not only to you but to your family also. This is necessary because if you put money for an emergency fund in complicated instruments, this may delay getting money on time.

in addition, in situations where you are temporarily incapacitated in an emergency, then it would be difficult for your family members to get the money on time in an emergency.

Thus, it is advised while picking up instruments for emergency funds, focus more on easy accessibility and less on returns.

Best Place To Put Money For Emergency ……………….

Here I am listing some simple tips, that you can follow to create an ideal emergency fund easily accessible:

• Always keep a part in Cash, but kindly note real hard cash and not plastic money. Now how much cash to keep? Unless you have undisclosed cash at home try to keep at least 1-2 month’s expenses worth in cash with you at all times. You can also keep 1-3 months’ worth in Savings Account.
• Put a major chunk in simple bank fixed deposits. Something like 2-3 months’ worth of expenses. And stick to large and safe banks for fixed deposits in India. Do not run behind high-interest offering banks.
• The third best option is to put your money in the ideal debt fund category for creating emergency funds and that is liquid mutual funds. Over the long term and hope you don’t need to touch your emergency fund; debt funds can be more tax-efficient. Do check debt fund taxation and how indexation reduces debt fund taxes.

Let Us Sum Up …………..

Here also I would advise doing not to think about putting all your emergency money in debt funds because at last, they are market-linked funds that are impacted by market events.

And please don’t consider credit cards as an emergency fund. You can use it but it’s best to avoid depending on it as your sole source of an emergency fund.

Keep reading our article and stay updated with the latest news about Mutual Funds!

For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).