Emergency Fund: A Rescue in Bad times !

A lot of startups follow this principle of “Hire slow and Fire Fast.” Pink slips are flying thick and fast at startups and internet-based companies across the country.

Recently, Flipkart was in news but for a different reason.

Flipkart is showing the door to around 700 employees. Previously, Snapdeal, Zomato, Grofers, Housing, TinyOwl and a host of others had laid off staff.

This is when Emergency fund comes to rescue. As the name suggests, it should only be touched in case of real emergency and something which requires some sort of immediate action.

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The concept of Emergency fund is not new. Our ancestors have been doing it for quite long. I have seen my Nani, save out of the money she got for household expense, a certain amount every month for bad times and that money always was a respite in the times of need. An emergency fund is designed to cover a financial shortfall when an unexpected expense crops up.

Following points should be kept in mind while building emergency fund:

  1. It should be liquid and easy to access.
  2. It should hold at least six months of salary to cover up expenses.
  3. Set up a liquid mutual fund or savings account
  4. Set up initial target low and start by saving small amounts and once it is achieved,then reach another milestone.
  5. Before using the emergency fund, ask yourself if it is the real emergency or the temptation.
  6. Don’t use emergency fund on Splurges, instead have a separate “Splurge Fund”.

By just following these points, you’ll be well on your way to being prepared for any situation that results in an unexpected financial loss.

Before you know it, your life won’t be disrupted by these kinds of emergencies – and you’ll sleep a lot better at night knowing that 🙂

About the Author:  Gurleen Kaur is a Financial Consultant and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She can be Contacted at gurleen@hareepatti.com

Author: Gurleen Kaur

2 thoughts on “Emergency Fund: A Rescue in Bad times !

  1. Good one. However can you comment upon my concern as below:
    I would like you to suggest:
    • Which investment avenue is considered to be safest & the risk element is lowest?
    • Is there any investment opportunity where the risk is ZERO (not almost but absolute ZERO)? &
    • Which investment is considered to be having the highest risk?

    I am a retired senior citizen of 70 yrs. falling within the lowest income tax bracket & have around 50 lacks to invest. To my mind PPF is safest but the limit to invest is 1, 50, 000 per yrs. only, what about the balance. Presently have placed deposits with banks, have investment in physical gold with some stock portfolio.

    I don’t have urgency for immediate cash & the investment could be for a longer duration but my age factor is to be considered for investment advice. The cash in hand & other liquid instruments are enough to take care of my present expenses. I also have sufficient medical coverage for any emergencies (20 lack mediclaim policies from public sector insurers for self, wife & my son).

    I have 2 sons one of them is happily married & is self dependent & the other one a bachelor but well qualified & very well placed living with me (annual CTC 14 lacks). My spouse is a house wife.

    I am not entitled for any pension & am self employed. The current cash flow is derived through dividend, interest income & minor professional income. Presently is living in a self owned house within a joint family.

    With GOD grace all of us are healthy with no major medical condition.

    What I am looking is for better investment opportunity if any or reallocation of assets with steady returns/cash flow.

    Any suggestions?

    I am open to any further query to support the investment suggestions/ advise.

    1. Hello sir,

      Thanks for the query. As per information shared by you, Considering your current situation, it is suggested that you allocate a part of your Deposits lying in bank in Mutual funds.

      Options Risk Asset allocation Expected Return over 5 years Tax treatment
      Debt Mutual Funds Low risk 100% debt 9-10% Tax efficient(indexation benefit)after3 yrs
      Balanced Mutual Funds Moderate Risk 60% Equity 40% Debt 12% Tax Free after 1 year

      It will not only help you diversify your portfolio, but will also help yield higher return on existing resources.You can invest 10% in Balanced funds and 20% in debt funds. Also, the investment in these products is liquid and can be withdrawn at any point of time.

      If this resonates with you, then shall share the scheme suggestions/ options.


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