Where should one keep their emergency fund? pls suggest
That is actually a great question! You have to treat this fund like a ‘fire extinguisher’. You have to have it handy but also pray and hope that you never have to use it.
So, your emergency fund should be easily accessible and risk-free while not chasing the highest returns.
The smartest way is to split it into 2 parts:
- Keep 30–40% for immediate access. You can keep this amount in a savings account or a sweep-in fixed deposit. This part covers urgent needs like hospital bills, car repairs or emergency travel.
- While you can park the remaining 60 – 70% in liquid or overnight mutual funds. These are low-risk, easy to redeem within a day or 2 and usually offer 6 – 8% returns. They are slightly better than a savings account.
A pro tip: Choose a fixed deposit account that offers a decent interest rate and no heavy withdrawal charges. It keeps your money safe while staying ready for use.
If your goal fund is around ₹2 – 3 lakh, consider building it gradually through a Systematic Investment Plan (SIP) in debt mutual funds. These funds are low-risk, help you earn modest returns and make the saving process more disciplined.
The key idea? Keep it safe yet always within reach.