Where to invest emergency fund
I have lump sum of 3.6 lakhs in my savings account. Pls suggest where to invest it.
I am thinking of 50% of lump sum invest in FD and 50% of lump sum in liquid funds.
When will you be needing this? And if you do, how much would you need?
Do you have absolutely zero emergency corpus at the moment?
Whatever your answer, FD is not really liquid (and hence not a smart idea)
I will only need this only in case of emergency like layoff, medical emergency, etc. I have extra 1.5 lakhs in saving account.
And what is the issue with FD? We can immediately break our FD, right?
Yes traditionally FD was not considered liquid . But now with online banking the proceeds are within your saving account in seconds . So as long as that is possible it can be considered for liquid funds. Or alternatively- take an OD against that FD , you will have access to liquid funds . ( interest would be charged only if you use it)
IMO one should have some emergency fund as absolute savings and not invest anywhere.
If you still want to invest then invest where you can take it back immediately (within seconds or minutes).
I had use ICICI bank account for emergency fund. In ICICI, you can move this amount to "linked account" which is kind of dynamic FD.
3.6+your current account balance, It will show as your account balance in the app. But 3.6 amount will give you returns for FD and can be withdrawn anytime.
Check with your bank if you have any other. If this feature is there
LiquidBees