Cash remains king: Why you need it the most in times of distress
Your investments and money accumulated over the years will be of no use if it cannot come to your rescue when you need it the most
An emergency fund is a must to help you sail through bad times. Experts suggest that the emergency fund should be able to cover expenses for a period of 6-12 months. But what will you do if you suffer a sudden health emergency and you require immediate cash.
If a need arises for getting hospitalised, at that point in time you will not have the time to locate an ATM. You may have a robust bank balance, a good bank FD in place and other investments too. But if you are not able to use it immediately, then it has no value. Therefore, it is important to keep a part of your investment aside so that you can use it when in dire need. There is no harm in keeping some cash with you at all times.
Cash cannot be ignored
According to Renu Maheshwari of Finscholarz, it is very good to use e-wallets and mobile payment tools, but during these pandemic times, it is essential that you keep some cash in hand. This should be enough to be able to pay for some emergency commuting or paying tips to helpers. The next tranche of emergency fund should be in savings account and flexi bank deposits linked to your savings account. The family should be aware of ATM card PIN so that they can use it during emergency.
Dhananjay Banthia of Smart Acumen Consulting suggests that expenses of two months of household budget must be kept in cash. If you have started a bank FD in the past 12 months, then you can withdraw money from it as the interest on FD has been low in the past one year. Some short-term liquid funds, which give you instant withdrawal facility, can also be used to maintain a liquidity ratio in your investment portfolio.
Avoid investments with long lock-in periods
Pankaj Mathpal of Optima Money Mangers says that if you do not have an emergency fund, then withdraw money from instruments with long lock-in periods.
“Keep this money in your savings account and it is important to have a health cover to deal with unseen expenses. If there is no health cover, then come what may even if you have cut down any of your expenses do that and get an appropriate health cover for you and your family because it will come to your rescue during a health emergency,” he told Money9.
Your investments and money accumulated over the years will be of no use if it cannot come to your rescue when you need it the most.