rameshmishra
KF Rookie
Creating an emergency fund is one of the most important steps in personal finance. It helps you stay financially secure during unforeseen events like medical emergencies, job loss, or urgent repairs. While most people park this emergency money in a savings account, there’s a better alternative that offers both safety and better returns — Liquid Mutual Funds.
Liquid mutual funds invest in short-term debt instruments like treasury bills, commercial papers, and certificates of deposit. These instruments have very low risk and mature in up to 91 days. That’s why liquid funds are considered one of the safest mutual fund categories.
What makes liquid mutual funds ideal for emergency funds is their high liquidity. You can usually withdraw your money within 24 hours on business days. Some AMCs even offer instant redemption facilities up to ₹50,000, making the fund almost as liquid as a savings account.
Another benefit is higher returns compared to regular savings accounts. While a typical savings account offers 2.5%–4% interest, liquid mutual funds can deliver returns in the range of 5%–6.5% (subject to market conditions). Over time, this can make a noticeable difference, especially if your emergency fund is large.
Moreover, liquid funds do not have a lock-in period, and their NAV (Net Asset Value) is less sensitive to market volatility compared to equity funds. This makes them a low-risk and stable option to park idle money.
In summary, if you're building or already have an emergency fund, consider using liquid mutual funds as a smart vehicle. They offer the right mix of safety, better returns, and quick access — everything that an emergency fund should ideally have.
Liquid mutual funds invest in short-term debt instruments like treasury bills, commercial papers, and certificates of deposit. These instruments have very low risk and mature in up to 91 days. That’s why liquid funds are considered one of the safest mutual fund categories.
What makes liquid mutual funds ideal for emergency funds is their high liquidity. You can usually withdraw your money within 24 hours on business days. Some AMCs even offer instant redemption facilities up to ₹50,000, making the fund almost as liquid as a savings account.
Another benefit is higher returns compared to regular savings accounts. While a typical savings account offers 2.5%–4% interest, liquid mutual funds can deliver returns in the range of 5%–6.5% (subject to market conditions). Over time, this can make a noticeable difference, especially if your emergency fund is large.
Moreover, liquid funds do not have a lock-in period, and their NAV (Net Asset Value) is less sensitive to market volatility compared to equity funds. This makes them a low-risk and stable option to park idle money.
In summary, if you're building or already have an emergency fund, consider using liquid mutual funds as a smart vehicle. They offer the right mix of safety, better returns, and quick access — everything that an emergency fund should ideally have.
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