Investment Ideas for Emergency Fund

An emergency always comes unannounced, and probably when we least expect it. Hence, it is good to be well-prepared for the challenges life throws at us. It is always advisable to have an emergency corpus that can come to your rescue to meet immediate expenses during unforeseen circumstances. Whether you are newly married or planning to start a family soon, considering emergency funds for your family’s well-being comes naturally.

Here is a list of investment ideas for emergency funds:

Insurance

There are several types of insurances – general insurance, life insurance, health insurance, child plan, pension plan, etc. All these are designed to take care of the financial needs of your family in your absence. Insurance can provide financial security cover to your loved ones in case of emergency. For instance, a life insurance policy protects your family if you are critically ill, become disabled or in case of your death. A comprehensive Child Plan can cover children's education and health. It provides a lump sum amount to the beneficiary, i.e., a child in case of death of the policyholder. Insurance these days also offer cash-less facility wherein you can initiate the medical procedure without submitting any cash, in times of emergencies. Hence, get thorough information before you zero-in on an investment option during emergencies.

Fixed Deposits

Long-term fixed deposits are good for creating an emergency fund. FD Interest rates being higher in long-term fixed deposit, it will help to earn good returns on the invested amount. Moreover, some companies like Bajaj Finance offer a higher rate of interest compared to banks and other finance companies.

Hence, there are chances to grow your corpus and accumulate enough money for future contingencies or emergencies. To calculate the total amount of maturity, you can use the FD Calculator. This will help you decide which plan is better for you, according to your financial needs.

Savings Account

You can opt for an online savings account that offers a higher rate of interest. Online accounts tend to pay a higher rate of interest compared to physical account, as they do not have overhead expenses. Moreover, saving account provides great flexibility to access the money, as you can withdraw it as per your will and need. You don’t have to apply beforehand to have access to your money. Also, you won’t be charged any penalty for withdrawing money at any time. If you have a debit card or ATM card of your account, you can access the account even in the middle of the night, if in need of cash. Hence, parking your money in a savings account may prove helpful during emergencies.

Mutual Funds

Mutual funds provide greater liquidity and higher returns. Isn’t that what you want during emergencies? However, as the mutual funds are linked to equity, the returns are always linked to market trends, which may show fluctuations accordingly. So, in case you invest in mutual funds regularly or for an emergency, it is better to have more investment options too. In short, keep your portfolio diverse to avoid making major losses.

It’s always better to be safe than sorry. Hence, plan your emergency funds even before you consider planning for your retirement.