When faced with unforeseen expenses, a contingency or emergency fund is the resource you fall back on. Circumstances like a job loss, a pay cut, or a medical crisis can leave you needing a constant flow of cash. An emergency fund needs to be liquid if it is to be effective. However, placing all your earnings in a savings bank account may not be wise because of the low interest rates and the eroding effect of inflation. A better route is to invest in products that generate attractive returns while giving you the liberty of immediate withdrawal. The Bajaj Finance Fixed Deposit, for instance, offers high FD rates of up to 7.05% and multiple liquidity options.
Read on to know more about building an emergency fund with a fixed deposit.
Grow your savings up to 7.05%
Parking your funds in an FD allows them to grow rather than remain stagnant, or worse, diminish. You can boost your savings at high FD rates of up to 6.80% as a citizen aged below 60 years. The FD interest rates offered to senior citizens go up to 0.25% higher than the base rate, meaning that you get a net rate of up to 7.05%.
Financial experts suggest that your safety net should be enough to fund 3 to 6 months of your daily expenses. Here’s a table showing how you can grow your safety fund.
Citizen aged below 60 years
2. Senior citizen
In both tables, you can see how you can boost your savings by investing a small amount and growing your emergency fund with a Bajaj Finance Fixed Deposit.
While these calculations are indicative, consider the period you would like to build your contingency fund when computing figures for yourself using the online FD calculator. Accordingly, account for the rise in your expenses, the rate of inflation, and your post-tax returns.
Park your funds in an AAA-rated instrument
Aggressive instruments may be apt for long-term goals but may not fit the bill for emergency funds. At all costs, you want to avoid a volatile investment instrument when what you need is the security of your funds. Bajaj Finance offers you the stability of investment alongside high FD rates. When you invest in a Bajaj Finance FD, you park your finances in a product that carries ICRA’s MAAA and CRISIL’s FAAA ratings. These are the highest attainable ratings in their respective categories and point to high credit quality. Thus, you have the assurance of default-free interest and principal payouts.
Retain multiple options for liquidity
With Bajaj Finance, you can take back your maturity proceeds after 12 to 60 months, as per your needs. If possible, you should pick a tenor of 36 months or more for the best FD interest rates. The flexible tenor facility also allows for laddering, a technique you can use to split your investment over multiple FDs and have them mature at regular intervals.
You can also prematurely withdraw your FD for emergencies but only post the initial 3-month lock-in period. However, this may lead to loss of interest, and to keep your investment intact, you can take a loan against your FD.
Small monthly savings with the Systematic Deposit Plan
Experts recommend that you allocate finances to your emergency fund as soon as payday arrives. An excellent way is to start a Systematic Deposit Plan (SDP). Here, you make contributions of just Rs. 5,000 or more every month. Each goes towards a new FD, which generates returns at the ongoing FD interest rates. With an SDP, you can pick a:
● Monthly Maturity Scheme: To keep a standard, fixed tenor for all your FDs and, therefore, have them mature month on month.
● Single Maturity Scheme: Keep the tenor of your FDs variable such that you receive all your proceeds on a single, fixed date.
Equipped with this information, you can now consider investing in a Bajaj Finance online FD to be prepared for unforeseen emergencies.
