Fixed Deposits for emergency fund: Don’t put all your money in one FD; do this instead

If you're building an emergency fund of Rs 10-15 lakh, instead of keeping the entire amount in a single FD, you might consider FD laddering. This involves dividing the money into FDs of different tenures. ₹10 lakh can be placed in One-, Two- and three-year FDs of Rs 3 lakh, Rs 3 lakh and Rs 4 lakh. An amount of Rs 15 lakh can be divided into three FDs of Rs 5 lakh each.

Kolkata: The importance of an emergency fund need not be explained to anyone in this age of sudden job losses or high medical expenses anymore. It’s important to maintain an emergency fund for unexpected medical expenses, home repairs or other unexpected job losses. If you have an emergency fund of Rs 10-15 lakh, you can use an FD instead of keeping the entire amount in a savings account. However, the biggest challenge here is ensuring that the money is readily available when needed and that it also earns some interest. To address this need, an FD laddering strategy can be useful. Instead of investing the entire amount in a single long-term FD, multiple FDs of varying amounts are created, maturing at different times. The primary objective of FD laddering isn’t to chase high returns, but to strike a balance between cash availability and interest earnings.

What is FD laddering and how does it........

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