Don't start long term investment without an emergency fund

[anupkuumar5]

Before you start your long-term investment journey, set up an emergency fund with at least 6 months of your salary. This step is essential to protect your investments from being disrupted by unexpected situations. Parking this fund in a liquid investment can not only provide quick access when needed but also generate returns. For instance, a ₹3 lakh corpus can yield around ₹15,000 annually—enough to cover your health and term insurance premiums. Build this safety net first; it’s the foundation of financial stability.

 

[arjungoyal12]

I have around 2-3 lakhs in mutual funds. I don't intend to withdraw. But there isn't any emergency fund. I want to know what might be the best options to start an emergency fund. I don't have a health insurance either.

 

[anupkuumar5]

If you have an ongoing SIP, I suggest you to pause it for sometime and use that fund to deposit in liquid fund. Doing this till you have a comfortable emergency fund will be a good idea without disturbing the existing investment in the mutual funds.

 

[arjungoyal12]

Can you suggest me some Liquid funds? I don't know if there will be charges when I pause my ongoing SIP

 

[anupkuumar5]

There is no penalty on pausing of mutual funds.
You can invest in SBI, HDFC or ABSL liquid fund. All have almost same returns.
Make sure you invest in liquid funds using Mycams or the fund website and not use it in DEMAT form. The advantage of doing this is that you can withdraw upto 90% of the liquid fund or 50000 rupees (whichever is less) within few minutes in your account. This can be done through the mutual fund website.

 

[Akshita.sri]

Before you start your long-term investment journey, set up an emergency fund with at least 6 months of your salary. This step is essential to protect your investments from being disrupted by unexpected situations. Parking this fund in a liquid investment can not only provide quick access when needed but also generate returns. For instance, a ₹3 lakh corpus can yield around ₹15,000 annually—enough to cover your health and term insurance premiums. Build this safety net first; it’s the foundation of financial stability.

Setting up an emergency fund is indeed a crucial step before embarking on a long-term investment journey. Here are some key reasons why this safety net is essential:

1. Financial Security: An emergency fund provides a cushion against unforeseen circumstances, such as job loss, medical emergencies, or unexpected expenses. Having at least 6 months' worth of salary set aside can help ensure financial stability during challenging times.
2. Protects Investments: By having a separate emergency fund, you're less likely to dip into your long-term investments or disrupt your financial goals when unexpected expenses arise.
3. Peace of Mind: Knowing you have a safety net in place can offer peace of mind and reduce financial stress, allowing you to focus on your long-term financial objectives.

Investing your emergency fund in liquid investments, like a savings account, fixed deposits, or liquid mutual funds, can provide quick access to funds while generating returns. For example, a ₹3 lakh emergency fund could earn approximately ₹15,000 annually—enough to cover your health and term insurance premiums.

Remember, building an emergency fund is the first step in creating a solid foundation for your financial well-being. Start saving today, and secure your future against life's uncertainties.