Where Should You Invest For Your Emergency Fund?

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Time and again experts suggest creating a sizable corpus as emergency fund to tide over any unforeseen situation that requires finance. Usually a minimum of 4-5 months of salary for a salaried class individual is suggested to be kept aside.

Where Should You Invest For Your Emergency Fund?

Now the question arises, where can you park this amount to reap a good enough return on it which is liquid at the same time.

In case you try to accumulate the amount by keeping it aside in a bank's savings account. The returns are low and also taxable in the hands of the investor as any amount over Rs. 10,000 in a year on a savings account is eligible for tax implications. Nonetheless, despite the current trend, wherein nearly all major banks have slashed down their interest rate offering on savings account, few new-age banks and some of the Payments Bank which recently began their operations are fetching better returns than their counterparts.

Liquid or Ultra short term funds: Ultra short term or liquid funds can also be chosen to build the emergency corpus. The return on them on an average has been known to be 6.5% which is not in line with the interest provided on savings account that is primarily based on the average daily balance in the account.

Other option can be short term FDs which in the current scenario are not offering as good return.

In the other case, when you have not been proactive on the front, avoid taking personal loans instead opt for overdraft facility or loan against property, gold, insurance and other investments as they are a way cheaper from these loans which are offered at a high rate of anyway between 18-32% interest.


Story first published: Tuesday, October 10, 2017, 7:49 [IST]
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