30 June 2020 | 3 min read

Here Is Why Fixed Deposits Are Good For Contingency Funds


While we emerge from more than three months of lockdown and step out and return to some version of the new reality, let us not forget the many things we learnt during this unprecedented time. From being mindful of ourselves to taking care of our body and mind and fostering deeper connections with people we love, every single fact of life we were running from was re-enforced during this period.

One such fact among this was the importance of having a contingency/emergency fund. With the economy coming to a sudden halt, many of us lost our jobs, faced drastic pay cuts and other financial strains. In such situations, the one thing that helps keep us afloat and our sanity in check is having a reserve of cash somewhere at the back we can readily use, in case of any sudden need.

This is the whole reason why financial experts advise on creating and building a good reserve of cash in the form of a contingency fund. This fund must have enough money saved up for any unforeseen circumstance or ‘rainy day’. And we all know, anyone can have that.

Importance Of Emergency Fund

Importance of contingency fund

Contingency funds help you emerge out of a stressful situation without depending on your friends/family for monetary help. Moreover, it ensures you don’t end up maxing out your credit card when adversity strikes.

This is why when building a contingency fund, make sure it is not easily accessible to you. However, given its purpose, it should not be an asset that cannot be easily liquified. Confused? Don’t be. To put it simply, a contingency fund should not fall prey to your habits of impulsive shopping. This is why it should not be easily accessible.

This also means that it should not be in the form of your house, car or another asset you believe you could sell off to get cash in return. After all, when unforeseen things happen, we are required to act quickly and thus having immediate access to your contingency fund is essential. Moreover, your contingency fund is a safety net for you and your family; thus, it should preferably be in a savings account and not in equity funds that are prone to market volatility and risk.

Fund Accessibility and Fund Value Protection

Accessibility of Fixed Deposit

This brings us to the critical point – which type of savings account is perfect for creating a contingency fund? The answer is FDs and RDs. While they might not earn you a high return like SIP or the stock market, it is safe from market volatility and you are guaranteed returns without losing your money.

Also, both FD and RD are quickly accessible if a need arises. And if you were to keep this money lying around in your savings account, the chances of you spending it on frivolous things is high. Opening an FD with digibank assures you of the following benefits.

  • Convenient – Manage your digibank FD – amount, tenure, add/change nominee, maturity instructions, termination, etc. all from your phone
  • Customisable – Open digibank FDs starting from ₹5000. Decide your own amount, choose your own tenure
  • Insured digibank FDs – Your deposits are insured by DICGC for up to ₹5,00,000 {5 lakh rupees}

Open a digibank FD here

Unlike Mutual Funds, Bonds and other high-risk investment vehicles, your contingency fund will be safe from external conditions ready to help you sail through a financial time if it ever comes to pass. That being said, if you haven’t started building a contingency fund, the right time is always now because, in future, you don’t want your emergency to dictate your life into taking a poor financial decision, monetary or notional loss.



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