emergency savings fund
  • How to Prepare for Unexpected Emergencies with a Savings Account?

  • Published By:
  • Category: Finance
  • Published Date: May 9, 2023
  • Modified Date: May 9, 2023
  • Reading Time: 3 Minutes

Featured Image Caption: Emergency Savings Fund

No one will ever expect sudden expenses like medical emergencies, home repair, or job loss. You should meet such costs with sufficient cash. It should have an emergency fund that softens the blow. Plan your finances wisely to overcome these situations.

The best solution is building an emergency fund in a bank offering high Savings Account interest rates. It lets you get through even the most complex financial situation. Financial advisors recommend holding a fund covering six to eight months’ expenses. Let us discuss some steps to create an emergency fund:

50:30:20 rule

The 50:30:20 is a basic budgeting rule that you can use to manage money more effectively. You can divide the income into 50% needs, 30% wants, and 20% savings, where needs include paying rent, groceries, and phone bills, and the wishes include social expenses, shopping, and travel. The balance of 20% goes towards savings and earns interest according to the Bank Saving Account interest rate.

Invest in Mutual Funds

Liquid Funds are a great choice as they offer higher return rates than FDs having a lock-in period. They usually have a residual maturity of up to 91 days and are a passive income source. You can link the scheme to your Bank Account and invest money flexibly.

Get Health Insurance

Collecting all the medical bills can put you in a difficult financial situation. You can overcome such expenses by buying Health Insurance that covers accidents, sudden hospitalisation, surgeries, etc. Remember to pay the premium on time or set up an auto-debit from your account.

Set up automatic transfers

The simplest way to prepare is to select a bank offering the best Savings Account interest rates and enabling the auto-debit facility to transfer a portion of your income. This way, you protect the future and hold only the amount needed to spend for the month’s expenses.

Reinvest the surplus funds

Do not utilise this account unless an emergency arises. While it may seem like extra liquid cash, it serves a much higher purpose. Instead of splurging the money, reinvest the surplus funds into other liquid assets.

Invest in Flexible FDs

An emergency fund means quick cash. However, Fixed Deposits have several time constraints. You cannot withdraw the funds until maturity. It is wise to open a Flexi FD offering higher interest than Bank Accounts while being liquid. Although there is a maturity period, you can break and utilize the amount without penalty from the Banking app.


The future is uncertain. Collecting funds for an emergency is a great way to secure it while ensuring your loved ones are under no financial pressure. It removes the stress of planning finances at the last minute while managing your current lifestyle.

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