Keep your emergency fund liquid

Covid-19 has made us all learn many lessons, primarily being-in trying times like these, one must have an emergency fund for sudden needs such as medical treatment or an income loss. Although friends and family may be the go-to resorts for funds, one can make a provision for the same in their financial planning and make one’s position more profound. Here are few of the ways to overcome the emergency situation-

1.Create an Emergency Fund:
It is always advisable to be prepared financially for emergencies. There should be an earmarked fund which will not be touched for any other expense. An emergency corpus could be equal to six months’ take-home salary of the individual so that the routine monthly expenses are taken care of. 

2.Liquidation of corpus:
Cash is the easiest form to access, and withdrawal of liquid fund is also not that difficult. You can place a redemption request on the mutual fund portal by quoting the folio number within the prescribed cut-off time and get the funds credited to the registered bank account on the same business day. Among other options-some fund houses also provide ATM facilities for withdrawal from liquid funds. Premature closure of FDs is also possible with some penalty levied by the bank.

3.Investments, both short and long term in nature:
Emergency corpus must be easily and quickly accessible in the form of cash or in the savings bank account. A part of the funds can also be invested in liquid mutual funds that invest only in money market securities and therefore carry low risk. FDs or RDs can also be considered. As far as possible do not break any long-term investments affecting your retirement corpus.

Health insurance cover
In case of a medical emergency, a health insurance cover is the most powerful support and can help you save your emergency funds if the cover is sufficient. Hospitals providing a cashless facility do not even require actual payment of bills and reimbursements.

It is important to keep in mind that, withdrawing cash from a credit card is not the best option as it has a very high rate of interest. Make sure that the spouse or care giver has knowledge of the emergency corpus and can act if needed on your behalf.

Finvestor Social Media

Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

See Full Bio