Jun 29, 2018 3 min read

Here’s How You Can Create Emergency Fund Using Mutual Funds

Invest in these emergency funds and get a financial shield for yourself and your loved ones.
It’s an uncertain market where contingencies can come at any point in time. It could be a sudden lay-off which leads to several months of unemployment, any serious illness or an accident that might hamper one’s ability to earn for a certain period.

But, as no one has the power to control such nasty financial surprises, having a plan B ready is the only key to tide over the crises. To be a helping hand in all such matters, credit cards have indeed played a vital role. But their presence is only appreciated till the time you are able to arrange funds to pay the debt as the bill arrives. The experts at MySIPonline suggest a better replacement of credit cards, i.e., emergency funds. In this write-up, we will learn about them and ways to create them. Also, we will share some good emergency funds for our investors. So without any further ado, let’s get started!

Emergency Funds: An Introduction

An emergency fund is the one that helps you to take care of your unforeseen expenses. For instance, there is a sudden hospitalization of any of your family members. In all such conditions, one is forced to borrow money from relatives or friends or break bank FDs, etc. Here’s when emergency or contingency mutual funds come into light. In case of mutual funds, liquid funds or ultra-short term funds are ideal for investors.

Why Avoid Bridge Loans?

Although taking loans from relatives or friends or any other such knee-jerk response can help you get money to take care of the present problem, they greatly create an adverse effect on your financial goals. This is the reason why we suggest our investors to avoid taking bridge loans.

What’s the Plan?

Ideally speaking, we, as experts, usually suggest keeping aside six months worth of expenses as a contingency fund. This amount can vary depending upon the need of an individual. For investors who have medical/health insurance, they don’t require sudden fund during a medical emergency. However, it’s wise to get prepared in advance for instances where any of your family members or even you might need money to constantly visit hospitals for therapies, medicines, tests, etc.

Creating Emergency Funds

Keep one part of your emergency fund in a savings bank account and the other larger half in liquid funds or ultra short-term funds. This is because your savings bank money could be used immediately. In case of a liquid fund, the money is received in a day’s notice. Investors who wish to seek the benefit of taxation can also park in arbitrage funds.

Don’t Forget to Replenish the Cash

If for any reason you have spent money from your emergency funds, make a point to replenish it. The occurrence of the next unaccounted expense is always uncertain. In fact, creating an emergency fund should be the first step towards any financial planning.

Our Recommendations: Best Emergency Funds

best liquid & ultra short term funds


When we talk about lack of finances for any need, mutual fund answers all of them. To get the best benefits from this investment instrument, it is important to invest at the right time first. So, do not wait for the emergency to come knocking at your door, be well prepared with a solution to face them headstrong.

We, at MySIPonline, believe in sharing the best recommendations for different needs and goals. If you have something in your mind concerning mutual fund investment or a financial goal, connect with us in no time via call or an email. We will be more than happy to serve you!

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