Best Safe Investment Options in India for Emergency Fund

Many of us tend to think of a backup source of income or financial niche to fall back upon in case of medical emergencies, inflation or merely to save money for retirement. In India, investing is now as important as saving money. There are various investment options available today with higher returns. Out of these, many are safe and stable to use and ensure guaranteed returns.

An emergency always comes unannounced, and probably when we least expect it. Hence, it is good to be well-prepared for the challenges life throws at us. It is always advisable to have an emergency corpus that can come to your rescue to meet immediate expenses during unforeseen circumstances. Whether you are newly married or planning to start a family soon, considering emergency funds for your family’s well-being comes naturally.

Here is a list of investment ideas for emergency funds:

Public Provident Fund

A Public Provident Fund or PPF is among the most popular and safe form of investment. It was introduced by the Ministry of Finance in the year 1968. It provides high-interest rates which are not taxable. The tenor is usually for 15 years and the current rate of interest for a PPF is fixed at 7.6% p.a. An account holder could choose to partially withdraw amount from the provident fund. However, that would be possible from the 7^th year of the deposit.

It should be noted that withdrawals can be made only once, in a financial year. A PPF can also be opened for a minor apart from working individuals. Either parents or the legal guardians can choose to open it for them. It should be noted that only one account can be opened for PPF. Premature closure of the PPF is allowed only after completion of five years. Usually, it is allowed on medical grounds, child’s education for which applicable bills and documents must be presented.

Post Office Schemes

A post office has small saving schemes for short-terms. It offers interest rates at the rate of 8.5% p.a. It can also provide 4% interest rate p.a. Individuals may also opt for the Post Office Monthly Income Scheme (MIS) which fetches 7.3% per annum monthly. on individual joint accounts. It is among the safest investment options available as it has been put out by the government and is quite popular and considered among young students and senior citizens. Post offices provide a 5-Year recurring deposit which has an interest rate of 6.9%. It is quarterly compounded and can be continued again for the next five years after maturity. Most probably on a year-to-year basis.

Fixed Deposit

A fixed deposit is quite popular among Indians. The main reason for that being is the fact that it is a stable form of investment and gives guaranteed returns. Different banks provide different interest rates. An investor may also choose to opt for NBFCs (Non-Banking Financial Companies) to gain higher interest rates as compared to banks. However, while do so, he or she should check the credit rating of that firm. Generally, a triple A rating is considered a safe investment. There are a few such financial institutions which provides 8.75% interest rate and has a MAAA and FAAA rating along with features, such as FD Calculator. Senior citizens even receive tax exemptions and higher returns on maturity of their FDs.

Long-term fixed deposits are good for creating an emergency fund. FD Interest rates being higher in long-term fixed deposit, it will help to earn good returns on the invested amount. Moreover, some companies like Bajaj Finance offer a higher rate of interest compared to banks and other finance companies. Hence, there are chances to grow your corpus and accumulate enough money for future contingencies or emergencies. To calculate the total amount of maturity, you can use the FD Calculator. This will help you decide which plan is better for you, according to your financial needs.

Insurance

There are several types of insurances – general insurance, life insurance, health insurance, child plan, pension plan, etc. All these are designed to take care of the financial needs of your family in your absence. Insurance can provide financial security cover to your loved ones in case of emergency. For instance, a life insurance policy protects your family if you are critically ill, become disabled or in case of your death. A comprehensive Child Plan can cover children’s education and health. It provides a lump sum amount to the beneficiary, i.e., a child in case of death of the policyholder. Insurance these days also offer cash-less facility wherein you can initiate the medical procedure without submitting any cash, in times of emergencies. Hence, get thorough information before you zero-in on an investment option during emergencies.

Savings Account

You can opt for an online savings account that offers a higher rate of interest. Online accounts tend to pay a higher rate of interest compared to physical account, as they do not have overhead expenses. Moreover, saving account provides great flexibility to access the money, as you can withdraw it as per your will and need. You don’t have to apply beforehand to have access to your money. Also, you won’t be charged any penalty for withdrawing money at any time. If you have a debit card or ATM card of your account, you can access the account even in the middle of the night, if in need of cash. Hence, parking your money in a savings account may prove helpful during emergencies.

Mutual Funds

Mutual funds provide greater liquidity and higher returns. Isn’t that what you want during emergencies? However, as the mutual funds are linked to equity, the returns are always linked to market trends, which may show fluctuations accordingly. So, in case you invest in mutual funds regularly or for an emergency, it is better to have more investment options too. In short, keep your portfolio diverse to avoid making major losses.

The above are among the few safe investment options, currently in India. However, investment is about receiving the right kind of returns expected at the predestined maturity date. The investment model should suit the requirements of the investor and the investor has to assess all the potential risks, even when investing in something which promises guaranteed returns.