It is good to have an investment folio that comprises a mix of high and low-risk options, but a dedicated emergency reservoir that can take on any curveball is unparalleled. This is because funds that you can dip into at a moment’s notice will help you handle any situation, be it emergency hospitalisation or car repairs. Here are 3 simple things you can do to prepare your finances for a proverbial rainy day.
Save Your Money
A savings account that offers high interest returns is one of the best ways to start an emergency fund. Research and compare interest rates, opt for a no-frills savings account and vow to park a sum every month for contingencies. It is a good idea not to have an ATM card attached to this account to eliminate the temptation to withdraw funds.
Opt For Recurring Deposits
If discipline is the underlying issue, you can also opt for a recurring deposit where a fixed sum will be whisked away from your account into a recurring deposit. The two things that make this a good option are that you earn higher interest than a savings account and you can withdraw whenever you wish to. The only catch is that you will have to forego a percentage of interest in case of premature withdrawal.
Save a lump sum as a fixed deposit
To make your strategy foolproof, invest extra income or bonuses in a fixed deposit. Choose short-term FDs to ensure better liquidity and for inflation-beating returns. Moreover, since you can take a loan against them as well, FDs can be a saviour during emergencies.
With these 3 strategies by your side, the odd financial hiccup won’t leave you perturbed.