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Emergency fund parking options
- Thread starter vijay
- Start date
Since you are talking about emergency fund, its best to keep in savings account! Rather than anywhere else!
=> Savings account which pays high interest rate (you can consider AU/RBL here)
As per the book, two things should always be ensured!
1. It should be readily liquidable!
2. It should be having almost 0% risk!
20% - Savings Bank
30% - Fixed Deposit in a bank.
50% - Short Term Debt Fund
30% - Fixed Deposit in a bank.
50% - Short Term Debt Fund
SiddharthR
TF Ace
According to me, open a FD in bank with the term giving highest interest rates and break the FD incase of emergency. A penalty will be charged but still you will get better returns than Savings account & Liquid Funds.
Penalty:
HDFC: 1% less than interest rate at the period of breaking FD.
SBI : 0.5% less than interest rate at the period of breaking FD.(upto ₹5,00,000)
1% less than interest rate at the period of breaking FD.(above ₹5,00,000)
dipendrak1
TF Neo
Which bank should I consider parking my emergency fund up to 5 lakhs as saving balance.
raghumahajan
TF Premier
The penalty does not work like this.
Example: If you have done FD for one year in SBI @7%/annum interest, but you break the FD within 3 months. It will give you interest of 3 months plan i.e., ~4%/annum - 0.5%(penalty) = 3.5%/annum.
Saving bank account also gives 3.5%/annum interest. So FD makes no sense.
