Building an emergency fund in a liquid FD or savings account

This bucket is for access, not max return

An emergency fund pays for job loss, medical gaps, or urgent travel without breaking long-term SIPs or raiding PPF. Three to six months of essential expenses is a common band; freelancers and single-income homes often want more. The right return is the one that keeps principal steady and cash reachable within days.

Equity SIPs and long lock-in products are the wrong shelf for this job even when their long-run averages look higher.

Savings sweep plus short FDs

Keep one month in a savings account for instant use. Ladder the rest in short or flexible FDs / liquid-style deposits your bank allows you to break with limited pain. Use the FD calculator to see interest if money sits unused—but optimising the last 0.25% is less important than actually funding the corpus.

Fund it like a bill

Auto-transfer a fixed amount on salary day until the target months are full, then stop and maintain. Replenish after every draw. Interest on FDs remains taxable for residents; that is acceptable for a safety pool. Do not chase tax-free status by locking emergency money where you cannot reach it.