1 day ago
How to Allocate a ₹5 Lakh Emergency Fund for Access and Returns
An emergency fund is money kept ready for sudden problems, like a medical bill or losing a job.
The article compares savings accounts, fixed deposits and liquid mutual funds.
A savings account is usually the fastest way to get money.
A fixed deposit may pay more interest, but taking money out early can have conditions or penalties.
A liquid fund may offer returns, but they can change and are not guaranteed.
Adhil Shetty gives one example for ₹5 lakh: ₹1 lakh in savings, ₹2 lakh in an FD and ₹2 lakh in a liquid fund.
This is only an example, and people’s needs differ.
The article says to check withdrawal rules and review the plan when circumstances change.
The article says emergency funds should prioritize quick access and capital safety over maximizing returns.
Savings accounts typically offer 2.5%–4% annual returns and usually provide immediate access.
Bank fixed deposits are listed at 5.5%–8.5%, but early withdrawal terms and penalties can affect returns.
Liquid mutual funds are listed at 5.5%–7%; returns are not guaranteed, and redemption may take time.
Adhil Shetty suggests an illustrative split of ₹1 lakh in savings, ₹2 lakh in an FD and ₹2 lakh in a liquid fund.
- Who
- People deciding where to keep an emergency fund; Adhil Shetty, CEO of BankBazaar, offers an illustrative allocation.
- What
- A comparison of savings accounts, bank fixed deposits and liquid mutual funds for a ₹5 lakh emergency fund.
- Where
- The article discusses financial products available in India.
- When
- The rate ranges are described as illustrative, not live quotes, as of 9 October 2026.
- Why
- To help people balance immediate access, capital safety and potential returns when preparing for emergencies.
Prioritize Immediate Access and Safety
Balance Access With Return Potential
How to allocate the fund
Prioritize Immediate Access and Safety
Keep enough money instantly accessible, favoring liquidity and capital safety over returns.
Balance Access With Return Potential
Use a mix of savings, an FD and a liquid fund to balance immediate needs with predictable or potential returns.
Use of liquid funds
Prioritize Immediate Access and Safety
Liquid funds are not risk-free: returns can fluctuate and redemption proceeds may take time to arrive.
Balance Access With Return Potential
They invest primarily in short-term debt and money market instruments and may offer access and return potential.
Key facts
- Illustrative fund size
- ₹5 lakh
- Savings account return range
- 2.5%–4% annually; typically immediate access
- Bank FD return range
- 5.5%–8.5% annually; premature withdrawal terms may apply
- Liquid mutual fund return range
- 5.5%–7% annually; redemption usually within one working day, subject to rules
- Suggested example allocation
- ₹1 lakh in savings, ₹2 lakh in an FD and ₹2 lakh in a liquid fund
- Allocation guidance
- The example should be adjusted for monthly expenses, income stability and individual circumstances.
- Rate caveat
- The stated ranges are illustrative, not guaranteed or live quotes; actual rates and returns may vary.
Quotes
Adhil Shetty
CEO of BankBazaar
“An emergency fund should prioritise liquidity and capital safety over returns. Savings accounts, bank FDs and liquid funds are among the options you can consider. For illustration, a ₹5 lakh fund could include ₹1 lakh in savings for immediate needs, ₹2 lakh in an FD for predictable returns and ₹2 lakh in a liquid for easy access and return potential. The allocation, however, should be based on your monthly expenses and income stability, while ensuring you can access the money when needed.”
livemint.com
Sources
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