Why Emergency Fund?


Dear Sir,

My employer (PSU) will pay all my medical expenses. And so not  taken medical insurance.

I think emergency fund is mainly to meet medical expenses. Also, I will not change job, so no break in monthly funds inflow.

May I know what are the other uses of emergency fund? Do I need to still create emergency fund?

If yes, please tell me the product where can I park my emergency fund. My tax rate is 10%.

Thank You

R Siva Prasad


6 replies on this article “Why Emergency Fund?”

  1. Dear Siva, I’m glad to know that you realize the importance of contingency fund so early.



  2. Dear FFC/Vinodh,

    I got it. Thanks
    I will keep half in SB A/c with sweep in facility and another half in Liquid Fund.

    Thank You
    R Siva Prasad

  3. Vinodh Kumar says:

    Hi Siva,

    I will give my own example from my family. My sister too works for PSU and she got transferred from one location to other location recently. Due to some missing transfer documents or some other technical reasons her salary was kept on hold for 3 months from treasury department.

    Now tell me how she would have survived? even though stable job in place? Here comes the importance of Emergency funds.

    Hope you understand!!

    Note: She was not worried because of her Emergency Fund was in place for savior.

    –Vinodh Kumar

  4. Also please note increase in group insurance each year is much higher than individual mediclaim. Especially if have not made any claim the previous year. Best to take a mediclaim floater plan in addition to basic group insurance offered and increase the sum assured each year as much as possible. This will help in retirement.

  5. As long as thing go well no one life needs emergency expenses! But then can you guarantee that it will. What can go wrong will – Murphys law. Having no emergency fund is like sending an invitation to Murphy to visit your house!

    By medical expenses If I understand you right you refer to consultation and medicines (hospital in-campus). So do I. Unfortunately there are many limitations to this. If you have not seen this limitations good for you! It only means that you have not been sick seriously. Believe there are better doctors out there and better medicines out there for which you need to pay to get better.

    Now what about hospitalization. There will be a group insurance scheme with an obvious upper limit. There will be sub-limits on room rent. If you get hospitalized there 100 expenses which not be covered by anybody. Happy to give you a list!

    Regular income, not going to change jobs (great same here)

    Now what if your vehicle breaks down of your appliances break down?

    I can keep going in the hope you get the idea.

    Park most of your money in a simple SB account with ATM card and some money in liquid debt fund like Quantum Liquid fund. You can get your money in a days time (max 2)

    Please allocate at least 3 months expenses as emergency fund. Add a little bit to it each month if possible

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