Just imagine, a family that owns several properties in Mumbai. One of its members falls critically ill, which requires more money than what is available at hand. As a result, they decided to sell a house off to fund the medical expenses. Going from one broker to another, to find the best price for the property doesn’t make much sense, does it? Also, a sale in distress doesn’t fetch you the best price for your asset. Not to forget the amount of paperwork that goes into selling a house. Instead, having money in a bank account that can be accessed almost immediately makes things a lot easier. The point of an emergency fund is to be able to get your hands on money as soon as disaster strikes without letting it cause you any more harm.

While emergency funds should be liquid, they are not meant to be accessed frequently. Hence, they must be invested in a manner such that it not only provides security but also gives good returns without having to compromise on liquidity. Parking your emergency funds in high risk-return sectors is never a good idea as it can lead to a high chance of losing the capital altogether and defeats the purpose of an emergency fund. On the other hand, liquid as well as short term mutual funds, savings accounts with sweep-in facilities etc. are some safe, return-providing options that an individual can consider for parking emergency funds. Emergency Funds in the form of investing may also attract taxes on gains, hence an avenue where tax implications can be balanced must be chosen.